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UPDATE 2-BOJ's new head vows to use all means available to hit price target
March 21, 2013 / 11:31 AM / 5 years ago

UPDATE 2-BOJ's new head vows to use all means available to hit price target

* No comment on whether plans emergency meeting-Kuroda
    * Balance sheet expansion alone not enough
    * BOJ should buy longer-dated assets to affect yields
    * Buying more risk assets also among options
    * Markets expect fresh BOJ measures at April 3-4 review


    By Leika Kihara and Stanley White
    TOKYO, March 21 (Reuters) - The new governor of the Bank of
Japan said the central bank is ready to use all means available,
including buying longer-term assets, to achieve its 2 percent
inflation target, underlining his resolve to beat nearly two
decades of grinding deflation.
    In his inaugural press briefing, Haruhiko Kuroda said bold
action was needed to meet the inflation target in two years,
supporting expectations the central bank will expand stimulus at
its next regular policy-setting meeting scheduled for April 3-4.
    Financial markets have speculated that Kuroda might even
call an emergency meeting before April 3-4 to push through
stimulus, after he had said during confirmation hearings that he
would act with speed. But he gave few clues away on that score
before a packed news conference.
    "The BOJ has held emergency meetings in the past, so it's
not impossible, but I shouldn't comment on whether there will be
an emergency meeting," he said on Thursday.
    The former top currency diplomat and his two deputies,
former academic Kikuo Iwata and career central banker Hiroshi
Nakaso, joined the BOJ on Wednesday with a mandate by Prime
Minister Shinzo Abe to pursue bolder, unorthodox policies to
finally stamp out the deflation that the central bank has
struggled to tame for years.
    Analysts said the officials provided no surprises in their
comments, largely repeating prescriptions they had offered
during parliamentary confirmation hearings this month.
    Still, Abe's relentless pursuit of what he has described as
"regime change" in economic policy means market anticipation of
bold BOJ measures is high. Tokyo's Nikkei share average 
has soared to a 4-1/2 year high and 10-year bond yields
 dropped to a near-decade low on Thursday. The yen
, which edged down after Kuroda's comments, fell last week
to its weakest level in more than three years.
    "Certainly monetary policy going forward will have to be a
lot more aggressive, ways that it could be done are bringing
forward the open-ended asset purchase programme from 2014 with a
wider range of assets," said Lee Hardman, currency economist at
Bank of Tokyo-Mitsubishi in London.
 
 
    
    ALL OPTIONS ON TABLE
    Kuroda said the central bank is open to various options in
easing policy, including switching to open-ended asset buying
sooner than the scheduled 2014 and boosting purchases of
longer-dated bonds. Still, he qualified those comments by saying
he would like to carefully discuss these options with the
nine-member board.
    He stressed that with interest rates virtually at zero, the
BOJ must try to affect market and public expectations of future
price moves by expanding its balance sheet aggressively.
    But he said pumping money into the economy alone isn't
enough, suggesting that he is ruling out reverting to the
quantitative easing of a decade ago when the BOJ targeted excess
reserves parked with the central bank and flooded markets with
cash mostly through purchases of short-term securities.
    "Quantitative easing alone may have some spill-over effects
on asset price moves ... But it's important to try and push down
yields across the curve with purchases of longer-term financial
assets," Kuroda said.
    "I'm not saying achieving 2 percent inflation is easy. There
will be challenges, but we must and can achieve it. We will take
all means available until the target is met," he said.
    The remarks underscore market expectations that Kuroda
favours the BOJ extending the maturity of government bonds it
targets beyond the current three years.
    Critics doubt Kuroda's prescription will work given Japan's
economy has been mired in nearly two decades of grinding
deflation despite aggressive money printing by the central bank.
    But he will remain under pressure by Abe to deliver on his
pledges and joins a board that had already been debating new
ideas to reflate the economy, such as targeting longer-dated
government bonds and boosting purchases of riskier assets.
    "The BOJ will streamline its bond purchases under Kuroda.
This would allow the BOJ to buy everything across the yield
curve," said Masayuki Kichikawa, chief economist at Bank of
America Merrill Lynch in Tokyo.
    "This will change price expectations. I'm in the optimistic
camp. I'm not so sure that we can reach 2 percent inflation in
two years, but we could have mild inflation by the end of next
year."

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