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.
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