Bank of Japan Gov. Haruhiko Kuroda pledged Thursday to engage in aggressive monetary easing to achieve the central bank’s 2 percent inflation target and end the nation’s prolonged bout with deflation.
“It is necessary to continue bold monetary easing in terms of quality and quantity under a strong commitment” to achieve the goal, Kuroda said at a hearing in the Upper House. The BOJ will clearly explain its aggressive stance to the market, he said.
Kuroda, former president of the Asian Development Bank, was appointed for a three-week run ending April 8 to complete the term of his predecessor, Masaaki Shirakawa, who resigned under political pressure on March 19. To get a full five-year term, he will have to undergo another round of Diet confirmation.
Kuroda said the BOJ will pursue monetary easing until the 2 percent inflation target is attained and will “do anything necessary,” including thinking about buying government bonds with longer maturities and thinking about buying more risky assets.
Most experts, however, agree that 2 percent inflation is extremely difficult to stoke with just monetary policy alone, and will require structural reforms as well as the Liberal Democratic Party’s usual pork-barrel public works projects.
The BOJ will hold its first regular policy meeting under the new leadership on April 3 and 4, with the nine-member Policy Board expected to discuss such additional measures as boosting purchases of government bonds. The BOJ is currently buying JGBs with maturities of up to three years.
Referring to the previous decision to end the zero-interest-rate policy in 2000 and exit from quantitative easing in 2006, Kuroda said the moves were “clearly not appropriate as a result.”
As for when the central bank might tighten monetary policy in the future, Kuroda said: “It is too early to talk about an exit strategy” because deflation is still in place and the consumer price index remains flat.
Meanwhile, Kuroda called on Prime Minister Shinzo Abe’s team to restore Japan’s fiscal health to avoid eroding investor confidence in JGBs and prevent sharp interest rate hikes that would adversely threaten the economy.