Likely next Bank of Japan chief promises to end deflation
Haruhiko Kuroda, nominated as the governor of Bank of Japan, says he will do what it takes to spur the economy and end 15 years of deflation
Bloomberg in Tokyo
The Japanese prime minister's nominee for the next governor of the Bank of Japan said yesterday he would do whatever was needed to end 15 years of deflation should he get the job.
Haruhiko Kuroda, the president of the Asian Development Bank, told a confirmation hearing in the parliament yesterday: "I would like to make my stance clear, that we will do whatever we can do."
The central bank had not bought enough assets and should buy longer-term bonds, Kuroda said, indicating that open-ended asset purchases could start sooner than next year.
Prime Minister Shinzo Abe's nomination of Kuroda has spurred forecasts for more aggressive easing to revive the world's third-biggest economy after Masaaki Shirakawa leaves the job of governor on March 19. The opposition Democratic Party of Japan, the largest party in the upper house, has signalled that it will back Kuroda, easing his passage through a split parliament.
The scale and scope of the assets bought by the central bank so far were not enough to achieve a 2 per cent inflation target, Kuroda said.
Open-ended purchases are not due to start until next year. Before yesterday's hearing, Masaaki Kanno, an economist at JP Morgan Chase, said the programme could be brought forward to May or June.
The Nikkei-225 Index lost some of its gains and the yen strengthened after Kuroda said the Bank of Japan should refrain from directly underwriting government debt, highlighting the potential for even expanded action by the central bank to disappoint some investors.
While meeting a 2 per cent inflation target will not be easy, Kuroda is confident that the bank can do it, he told the parliamentary hearing. He said a two-year timeframe was the global standard for such goals.
Nomura and Mizuho both said more easing could come as soon as the first policy meeting under the new BOJ leadership, scheduled for April 3 and 4.
Ending deflation would be good for the global economy, Kuroda said, adding that Japan's easing was not aimed at weakening the yen, a restatement of official comments aimed at easing global concern over the currency's decline of about 12 per cent to the US dollar in three months.
Kuroda said previously that falling prices exacerbated real debt burdens, and gave an incentive to companies and households to postpone spending.
Consumer prices, excluding fresh food, fell 0.2 per cent in January. The consumer price index has not risen 2 per cent, the central bank's new target, in any year since 1997, when a national sales tax was increased.
"Further easing policies are needed," Kuroda said. "However, the policy board will decide on the specifics of doing this based on market conditions and economic trends."
Abe has nominated Kikuo Iwata, an economics professor who backs greater government oversight of monetary policy, and BOJ executive director Hiroshi Nakaso for two deputy governor posts.