Bank of Japan Gov. Haruhiko Kuroda pledged Monday to continue pursuing monetary stimulus in close coordination with Prime Minister Shinzo Abe’s government to achieve 2 percent inflation.
“The Japanese economy is getting stronger under the powerful monetary policy of the Bank of Japan, and we see a steady move toward 2 percent inflation. Going forward I will work toward meeting this goal with all my strength,” Kuroda said at a news conference as he began his next five-year term as governor of the central bank.
The BOJ and the government set their elusive 2 percent inflation goal in January 2013, when both parties took the unusual step of releasing a “joint statement” stating their intention to coordinate policy.
While the initial decision raised concerns that the bank’s independence was at risk, standing side by side Kuroda and Vice Prime Minister Taro Aso stated again on Monday their intention to “stick” with the policy coordination framework to escape deflation.
“We will stick with the joint statement outlining the Bank of Japan and government’s own roles, and will use all our strength to meet the price stability target,” said Kuroda, referring to his insistence on hitting the 2 percent inflation target after a meeting at the Prime Minister’s Office with Abe, Aso, Chief Cabinet Secretary Yoshihide Suga and economic and fiscal policy minister Toshimitsu Motegi.
The original joint statement laid responsibility to achieve price stability with the BOJ and tasked the government with strengthening the competitiveness of the Japanese economy.
As these original goals have been difficult to achieve, the BOJ has come under increased pressure from the government to continue monetary easing to finally meet the 2 percent inflation target.
Kuroda, however, appeared to move in a different direction than the government in March, mentioning that the BOJ may finally wind down stimulus sometime in 2019.
But since making the comments and raising concerns that the BOJ may finally be on a path toward normalization, Kuroda has slowly walked back his statement to ensure market participants that the bank will not remove stimulus until the 2 percent target is reached.
Kuroda repeated this refrain Monday, stating that “a fast move toward an exit is difficult to speak about at this time.”
Attempting to recognize the upside and downside risks, he also pointed out the BOJ’s role of ensuring stability in the financial system.
While the BOJ searches for the best balance between the risks and upside of the bank’s unprecedented monetary policy, Kuroda gave no indication that government pressure would prevent him from serving out his full term in search of the 2 percent inflation goal.
“Of course I plan to work all five years of my next term,” Kuroda said.