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BOJ to continue monetary easing while gauging economic effects: Kuroda

Kyodo

Bank of Japan Gov. Haruhiko Kuroda said Thursday the central bank will continue “powerful” monetary easing as it does its part in revving up Japan’s persistently low inflation, while keeping a close watch on the unorthodox policy’s effects so it can be adjusted accordingly.

In determining the appropriate yield curve, or the difference between short-term and long-term interest rates, the BOJ will “assess the impact on the economy, prices and financial conditions,” Kuroda said in a speech in Tokyo.

Under a policy framework adopted in September last year, the BOJ guides short-term rates at minus 0.1 percent and the yield on 10-year government bonds at around zero percent. Critics have argued that the bank’s massive bond purchases are drying up liquidity and could make it difficult to keep down long-term rates.

But Kuroda dismissed such concerns, saying the program has been “conducted in a smooth manner thus far and the bank expects that the risk of having a problem in terms of continuing with its bond purchases will be small for the time being.”

“I would like to re-emphasize that yield curve control is designed to be highly sustainable,” he added.

While inflation remains far from the BOJ’s 2 percent target, Kuroda said the policy has succeeded in “drastically improving” the economy, and he expects wage hikes to spur a “virtuous cycle” in which solid household spending allows businesses to raise prices, adding to corporate profits.

“Although, for the time being, it is likely that some firms will decide on a price rise while others will remain hesitant, firms’ bullish stance to raise prices is expected to become predominant eventually.”

Core consumer prices, excluding fresh food because of their volatility, rose a tepid 0.8 percent in October from a year earlier.