LONDON – Bank of Japan Gov. Haruhiko Kuroda has repeated his determination to follow through on the central bank’s pledge nearly a year ago to raise consumer prices by 2 percent year on year.
“We have been taking a stance of doing whatever we can” to achieve that goal, he said in a speech Friday at the London School of Economics.
Japan’s economy has been on a path toward reaching 2 percent inflation, Kuroda said, stressing that the transmission mechanism of the BOJ’s “quantitative and qualitative” monetary easing policy “has been functioning as initially intended.”
According to various surveys and indicators, inflation expectations have generally been rising, he noted.
The economy “is expected to continue on a moderate recovery, with a virtuous cycle among production, income and spending at work,” he said.
Under the aggressive, ultra-easy monetary policy the BOJ launched in April 2013, the bank is trying to stoke 2 percent inflation in about two years by buying massive amounts of financial assets, mainly Japanese government bonds.
“Our work to change deflationary expectations that have been entrenched over time as well as people’s behavior under such expectations has been progressing as expected,” Kuroda emphasized in his speech, titled “How to Overcome Deflation.”
The year-on-year growth in the consumer price index is expected to reach 2 percent “from the end of fiscal 2014 through fiscal 2015,” he predicted.
The economy is expected to “temporarily decline” after the consumption tax is hiked to 8 percent from 5 percent on April 1, the first day of fiscal 2014, but will “continue to grow above its potential growth rate as a trend” under the virtuous cycle, he said.
The BOJ will examine economic risks and make policy adjustments as appropriate to attain the inflation target, Kuroda said.
“I am convinced that we can achieve the 2 percent price stability target and overcome deflation,” he said.
In a question and answer session after the speech, Kuroda said it is premature to start discussions on how or when to exit the radical easing policy, but pointed out that many options will be available, including selling back the assets purchased under it.