Vowing to institute effective monetary easing steps should he be installed as the next Bank of Japan governor, Haruhiko Kuroda, the government’s nominee, insisted Monday that the central bank’s 2 percent inflation target can be achieved through monetary policy.
“I believe it is possible to attain the 2 percent price stability target with monetary policy,” the Asian Development Bank president said in a confirmation hearing at the House of Councilors.
Kuroda added that the government’s flexible fiscal spending, along with the realization of its medium- to long-term growth strategy, would help the bank accomplish the mission.
Kuroda, who will assume the post of BOJ governor on March 20 if approved by the Diet, said he would like to discuss and decide swiftly on specific monetary easing measures but he declined to say whether the bank would hold an extraordinary meeting.
The BOJ’s first regular policy meeting under the new leadership is scheduled for April 3 and 4.
Criticizing the BOJ’s easing steps as “insufficient” to overcome 15 years of deflation, Kuroda said the BOJ needs to take bolder steps from the perspective of both “quantity and quality,” such as buying government bonds with a longer maturities than those currently being purchased, which are of up to three years.
On the BOJ’s possible purchase of foreign bonds, seen as aimed at driving down the yen, Kuroda said the BOJ “does not face the need to consider” such a step, adding that seeking a stable currency is the government’s role and that markets should decide exchange rates.
Kuroda repeated his view that the BOJ’s adoption of the inflation target, proposed by Prime Minister Shinzo Abe, was “epoch-making” and pledged to “certainly fulfill” the target, calling it the “biggest mission for the BOJ governor.”
To counter any adverse effects, such as an asset bubble that could form from excessive monetary easing, he said the BOJ would flexibly review its policy to stabilize inflation at around 2 percent.
The appointments of the BOJ governor and two deputies must be approved by both chambers of the Diet. As the Liberal Democratic Party-led ruling coalition lacks a majority in the Upper House, support from the Democratic Party of Japan will be essential.
DPJ sources say the party is set to give the nod for the former vice finance minister for international affairs to head the BOJ.
Besides Kuroda, the DPJ plans to accept the nomination of BOJ Executive Director Hiroshi Nakaso for one of the deputy posts but may reject the other nominee, Kikuo Iwata, a Gakushuin University professor who advocates bolder monetary easing to achieve the 2 percent target.
Smaller opposition parties are planning to vote for Iwata, and all three nominations are expected to be approved Friday.
BOJ Gov. Masaaki Shirakawa is set to step down March 19 along with his two deputies before his five-year term expires April 8.
The government, the LDP and coalition partner New Komeito want to avoid a recurrence of a vacancy in the BOJ leadership that resulted in 2008 after the DPJ, the largest opposition party at the time, rejected the government’s nominees.