Bank of Japan governor pledges to prolong stimulus

Bank of Japan governor Haruhiko Kuroda stressed his resolve to maintain massive stimulus for a prolonged period yesterday but shrugged off the need to expand it soon, remaining upbeat on the outlook despite signs the economy may be in a mild recession.

Kuroda also stuck to his view that a weak yen is positive for Japan's economy. But he slightly modified his tone by nodding to concerns from the business community that further yen declines will hurt small firms and households by boosting import costs.

"If the currency moves reflect economic and financial fundamentals, they should be positive, not negative, for the economy," he said yesterday.

As widely expected, the Bank of Japan maintained its pledge of increasing base money at an annual pace of 60 trillion (HK$4.28 trillion) to 70 trillion yen via purchases of government bonds and risky assets.

The central bank maintained its view that the world's third-largest economy continues to recover moderately. But it offered a bleaker view on factory output, saying it was "weakening" as a slump in demand after a sales tax increase in April left car and electronic makers with a huge pile of inventory.

Kuroda said the tax-increase pain and bad summer weather had weighed on consumption longer than expected. But he stressed that after a temporary soft patch, growth would pick up enough to accelerate inflation toward the bank's price target.