BOJ Kuroda Warns Japan’s Inflation Target Still Distant

Bank of Japan Governor Haruhiko Kuroda pledged to forge on with very accommodative monetary policy as he warned that his inflation target remains distant and the current pace of growth in the world’s third-largest economy looks unsustainable.

Speaking in an interview with Bloomberg in Jackson Hole, Wyoming, Kuroda also said the BOJ’s yield-curve control program has been working quite well and that he doesn’t see a need to adjust it at present. He added that the BOJ may be able to control rates while buying fewer Japanese government bonds and that the market is still “functioning quite well.”

The BOJ chief, who joined Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi at the mountain retreat for an annual gathering of monetary policy makers, is grappling with an economy that’s in its longest run of expansion in more than a decade but is still failing to generate significant wage gains and a healthy level of inflation.

“I think 4 percent growth is excellent but we don’t think 4 percent growth can be sustained. Around 2 percent growth is likely,” Kuroda told Bloomberg Television’s Kathleen Hays. “I think for some time we have to continue this extremely accommodative monetary policy.”

While Yellen and Draghi are also contending with growth and inflation that are somewhat out of sync, Kuroda views the problem in Japan as more serious.

“The economic and price situation in the U.S. is much, much better than the situation in Japan,” said Kuroda. He noted that Japanese businesses and labor unions still exhibit a “deflationary mindset,” which is crimping price gains and has seen the BOJ delay the projected timing for reaching its 2 percent price target six times.

via Bloomberg

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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