BOJ's Kuroda signals ready to keep stimulus more than 2 years

Wed Apr 10, 2013 8:00am EDT

* BOJ took all necessary steps for now - Kuroda
    * BOJ eyes 2-year timeframe but may keep stimulus longer
    * Kuroda says will tell G20 BOJ not targeting FX moves
    * Too early to debate exit policy but Fed offers clues

    By Leika Kihara and Sumio Ito
    TOKYO, April 10 (Reuters) - Bank of Japan Governor Haruhiko
Kuroda said on Wednesday that the bank was resolved to keep
printing money for as long as needed to achieve 2 percent
inflation, signalling his readiness to offer further stimulus or
maintain an ultra-easy policy beyond two years if meeting the
target by then proves difficult.
    Barely two weeks into the job, Kuroda stunned global markets
in his maiden BOJ policy review on April 4, announcing monetary
easing measures of an unprecedented scale.
    Speaking to journalists days later, he suggested there would
be no additional stimulus given in coming months.
    The central bank, he told a group interview, must take time
scrutinising the effect of last week's bold action.
    "Our belief is that we took all necessary steps to achieve
the 2 percent inflation target basically in two years. We'll
examine the effect each month but that doesn't mean we will
adjust policy every month," Kuroda said.
    The BOJ last week unleashed the world's most intense burst
of monetary stimulus, pledging to inject about $1.4 trillion
into the economy in less than two years, marking a radical shift
from the previous approach of incremental action. 
    The massive scale of the stimulus pushed the yen near a
four-year low against the dollar and Japan's Nikkei share
average to a nearly five-year closing high.
    But the BOJ's plan to buy 7.5 trillion yen ($76 billion) of
bonds each month -- about 1.4 percent of Japan's gross domestic
product -- have jolted bond prices with the 10-year yield
rebounding to 0.555 percent on Wednesday from a record low of
0.315 percent last week.
    Kuroda said the bond market reaction was understandable
given the scale of the BOJ's action, but that he will monitor
price moves carefully.
    He said he was confident the latest measures were enough to
achieve the BOJ's 2 percent inflation target in roughly two
years, but signalled readiness to keep pumping money
aggressively for longer if the target is not achieved by then.
    "The key is to achieve the 2 percent inflation target. We
have in mind a timeframe of roughly two years, but we'll take
necessary steps until the target is met," he said.
    A former top currency diplomat and a vocal advocate of
aggressive monetary action, Kuroda was chosen by Prime Minister
Shinzo Abe to head the BOJ with a mandate to steer the bank
along a bolder course to beat deflation than the one taken under
his cautious predecessor Masaaki Shirakawa. 
    The measures unveiled by Kuroda last week won praise from
Abe's government as fulfilling the premier's relentless pursuit
of what he described as a "regime" change in economic policy.
    
    WILL TELL G20 BOJ NOT TARGETING YEN
    Kuroda said the BOJ's stance that its monetary stimulus aims
to beat deflation, not deliberately weaken the yen, would be
explained to Group of 20 finance leaders meeting in Washington
next week.
    Japan's move won cautious endorsements from the head of the
International Monetary Fund and some Federal Reserve
policymakers, who said it could help economies around the world.
But there are concerns that the unprecedented easing may provoke
a currency war as other Asian exporters, such as South Korea,
try to stay competitive with weaker currencies.
    "Our policies are taken for domestic purposes and currencies
are absolutely not our target. If Japan's economy recovers
steadily and price stability is achieved as a result, that
benefits not just Japan but the global economy including our
neighbours," Kuroda said.
    "It's unthinkable that we will change monetary policy just
because currencies move in a certain way," he said.
    
    STAYING FLEXIBLE
    Under pressure from Abe, who came to power in an election in
December, to take bolder action to beat deflation, the BOJ in
January doubled its inflation target to 2 percent.
    Many analysts consider the target to be too ambitious for a 
country that has not seen prices rise for nearly two decades.
    Kuroda said he saw little need now to worry about the BOJ's
latest stimulus sowing the seeds of a bubble, and that it was
too early to debate an exit from its ultra-easy policy.
    Economic and price developments, the governor said, could
nudge the BOJ either toward loosening policy or withdrawing
stimulus in the future. "Adjustment in policy could be either
way," he said.
    He added that in the event of withdrawing stimulus, the BOJ
may not necessarily have to sell government bonds to the market
and instead may look at some steps floated by the U.S. Federal
Reserve, such as raising interest rates for excess reserves
parked with the central bank.
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