BoJ Kuroda Expresses Confidence on Inflation Target

Bank of Japan Governor Haruhiko Kuroda said Saturday that raising inflation expectations in Japan is a “big challenge,” but expressed confidence that the central bank’s large-scale monetary policy is producing the intended effects to overcome deflation.

“Looking back at the history of central banking, raising excessively low inflation expectations through policy is a big challenge,” Kuroda said in his speech at a university in Tokyo, noting that a “deflationary mindset” has been embedded in the public amid protracted deflation.

Under the BOJ’s monetary easing policy introduced in April to conquer deflation, the bank is aiming to double the monetary base and is boosting purchases of long-term government bonds to achieve a 2 percent inflation target in about two years.

He said the BOJ demonstrates “strong and clear commitment” to dispel deflationary expectations that have taken root among firms and households and that the bank also has “embarked on a new phase of bold monetary easing.”

The BOJ chief said the bank’s easing policy “has steadily produced the anticipated effects so far,” citing higher stock prices and low interest rates, and has also increased core consumer prices, which have been rising since entering positive territory in June.

Meanwhile, Kuroda expressed the view that exiting from the current ultraeasy monetary policy involving massive purchases of long-term government bonds may be “a bit more difficult” than previous easing measures adopted by the central bank.

“Exiting might be a bit more difficult than exiting from the BOJ’s former zero-interest rate policy” or quantitative easing policy, Kuroda said after his speech, adding that central banks have little experience of exiting from such easing steps.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza