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Deflation foe Kuroda takes helm of BOJ

by Jun Hongo

Staff Writer

New Bank of Japan Gov. Haruhiko Kuroda reiterated his determination to end Japan’s decades-long deflation after officially being named to the position Thursday by Prime Minister Shinzo Abe.

“I was told to do all I can and bring the Japanese economy out of deflation,” Kuroda told reporters after meeting with Abe. “I replied that I will do everything I can together with my two deputy governors” to meet that goal, he added.

During his inaugural news conference later in the day, Kuroda expressed optimism about achieving the 2 percent inflation target in two years.

“Although there may be lots of difficulties, we must achieve the goal and I’m confident we can,” he said. “I’m resolved to take every step possible until we can do it.”

Kuroda said the BOJ will promote bolder monetary easing in terms of quantity and quality, an indication the central bank will consider employing additional easing steps at its next policy meeting scheduled for April 3 and 4.

He meanwhile played down the danger of an asset inflation bubble.

The most important objective, he said, is to end deflation, which has been gripping the country for the past 15 years.

While admitting monetary easing tends to push down currencies, Kuroda said monetary policy is not specifically targeted at exchange rates.

Kuroda resigned as president of the Asian Development Bank on Monday to serve as the new BOJ chief. He has been critical of predecessor Masaaki Shirakawa’s policies and is likely to usher in changes to the central bank by putting forward more aggressive easing.

Kuroda “is an ideal person who can work in harmony with the government’s determination to implement bold monetary policies,” Chief Cabinet Secretary Yoshihide Suga said Thursday.

“We hope that the 2 percent inflation target, agreed previously between the government and the BOJ in a joint statement, will be achieved swiftly under the new establishment,” Suga added.

Kuroda is expected to pump trillions of yen into the market by purchasing longer-term government bonds as well as assets that come with higher risks. Critics, however, said it is unclear whether lavish spending would cure deflation and warned it could further deteriorate Japan’s already bloated government deficit.

Shirakawa has warned that any central bank actions that smack of government financing would call into question Tokyo’s resolve to push through fiscal reforms and could cause long-term interest rates to spike.

A University of Tokyo graduate, Kuroda, 68, earned an advanced degree in economics from the University of Oxford. He joined the Finance Ministry in 1967 and later served as vice finance minister before being named president of the ADB in 2005.

Newly appointed Deputy Govs. Kikuo Iwata, 70, and Hiroshi Nakaso, 59, are also University of Tokyo graduates. Iwata, an academic, has taught economics at Sophia and Gakushuin universities and is a strong advocate of ultraloose monetary policy.

Information from Kyodo added