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BOJ to maintain powerful easing for 2% inflation: deputy chief

Kyodo

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The Bank of Japan will maintain its current aggressive monetary easing to achieve a 2 percent inflation goal, a deputy governor said Thursday, despite U.S. President Donald Trump’s criticism of Tokyo guiding the yen lower.

Hiroshi Nakaso apparently tried to fend off Trump’s claim ahead of Friday’s U.S.-Japan summit in Washington, emphasizing the central bank’s monetary policy is aimed at bolstering domestic demand in Japan and propping up consumer prices at home.

“Although the momentum toward achieving the price stability target of 2 percent has been maintained, it is not yet sufficiently firm and there is still a long way to go to achieve the target,” Nakaso said in a speech in the city of Kochi.

“Under these circumstances, I believe it is of utmost importance at the current phase that the bank persistently pursues powerful monetary easing,” Nakaso added.

Since BOJ Gov. Haruhiko Kuroda took office in 2013, the bank has been making efforts to drive down long-term interest rates to stimulate consumption and investment by buying massive bonds from the market and introducing a negative interest rate policy.

In September last year, the bank also launched its new “yield curve control” policy, designed to keep the targeted 10-year Japanese government debt yield at around zero percent. Interest rates move inversely to bond prices.

Amid growing speculation the interest rate gap between Japan and the United States may broaden further, the yen has plunged more than 10 percent against the U.S. dollar since Trump’s victory in the Nov. 8 presidential election.

Trump, who is pursuing a weaker U.S. dollar to boost U.S. exports under his “America First” policy, is likely to raise the issue of the BOJ’s drastic monetary easing and accuse Tokyo of intentionally devaluing the yen, analysts say.