* BOJ revises up assessment on overseas economy
* No policy action as economic recovery on track
* Keeps view on Japan's economy, exports unchanged
* Governor Kuroda says economy "within our expectations"
(Adds Kuroda quotes)
By Leika Kihara
TOKYO, June 13 Bank of Japan Governor Haruhiko
Kuroda said on Friday he saw no reason for the yen to strengthen
against the euro, pushing back at the European Central Bank's
efforts to keep euro gains in check with its latest stimulus
The remarks came after the BOJ kept monetary policy steady
and offered a more upbeat view on overseas growth, signalling
confidence the economy is on course to meet its inflation target
next year without additional stimulus.
The ECB last week became the first major central bank to
impose negative interest rates, or charge financial institutions
for parking funds at the central bank, a move markets see as
partly aimed at keeping euro gains in check.
Some in the BOJ, who have been surprised by the unusually
blunt language ECB officials have been using to rein in euro
rises, were relieved to see that the ECB's policy action did not
lead to a sharp yen rebound against the euro.
Kuroda praised the ECB's latest moves as showing its
determination to keep long-term inflation expectations well
anchored, saying that he saw the risk of the entire euro-zone
region slipping into deflation as low.
But the former Japanese top currency diplomat, who knows
markets inside out, also warned that explicit European attempts
to weaken the euro against the yen will not work much.
"Japan is steadily moving towards the 2 percent price target
but we're still halfway there. We also plan to continue our
stimulus programme until 2 percent inflation is stably
achieved," Kuroda told a post-meeting news conference.
"I don't think there is a reason for the yen to strengthen
against the euro from the ECB's stimulus package, including
negative interest rates," he said, offering the most direct
remark to date on the exchange-rate impact of the ECB's move.
Both the ECB and the BOJ argue that their monetary policies
do not directly aim at influencing currencies. But they do
prefer their currencies to weaken because that will push up
prices and give their exports a competitive advantage overseas.
Kuroda's comments show the BOJ still places much emphasis on
exchange rates in guiding policy, said Masayuki Kichikawa, chief
Japan economist at Bank of America Merrill Lynch Securities.
"If the euro depreciated by 10 or 20 percent, the BOJ could
not ignore this because of the implications for inflation in
Japan. If it's really serious, the BOJ could consider taking
some action," he said.
As widely expected, the BOJ maintained its monetary policy
framework, under which it has pledged to increase base money by
60-70 trillion yen ($588-$686 billion) per year via aggressive
UPGRADES OVERSEAS ASSESSMENT
Under an intense burst of stimulus launched in April last
year, the BOJ pledged to double base money via aggressive asset
purchases to end deflation and accelerate consumer inflation to
2 percent in roughly two years.
With consumer inflation having exceeded 1 percent, Kuroda
has said repeatedly that Japan is making progress toward meeting
the price goal during the fiscal year beginning in April 2015.
But he has also said the BOJ is ready to ease further if
risks threaten the recovery, keeping alive expectations of more
stimulus on hope it will rein in any sharp rises in the yen.
Kuroda said Japan's economy was showing signs of having
weathered a sales tax hike in April that had been watched by
economists as a risk to the recovery.
"The economy is moving roughly within our expectations.
Household spending remains solid as a trend," he said, noting
there were also signs of clear improvement in job conditions and
"We expect a gentle recovery to continue," he added.
Japan logged its fastest growth in two years in the first
quarter thanks to surprisingly strong capital spending, in a
fresh sign that the economy is in better shape to weather the
hit from the April tax hike.
Sluggish exports remain a soft spot for the economy,
although BOJ officials see overseas headwinds receding as
China's exports rebound and as the U.S. economy recovers from a
"Overseas economies, mainly advanced economies, are
recovering, although lackluster performances are seen in some
areas," the BOJ said in a statement. That was a brighter view
than last month, when it said global growth was "starting to
recover" albeit with lacklustre performances in some areas.
The central bank also left unchanged its assessment that
Japan's economy continues to recover moderately as a trend,
while exports have been "more or less flat."
Kuroda's optimism has led market players to scale back bets
of further monetary easing this year, though many economists
remain sceptical that prices will continue to pick
($1 = 102.0800 Japanese Yen)
(Additional reporting by Stanley White, Tetsushi Kajimoto and
Kaori Kaneko; Editing by Kim Coghill and Kevin Krolicki)