* Exit plan depends on price, market moves at the
* Kuroda calls on govt to push through growth strategy
* Poll shows markets still expect BOJ easing, but at later
* Real wages continue to fall, underscoring tax hike pain
(Adds BOJ poll, wage survey)
By Leika Kihara
TOKYO, June 3 Bank of Japan Governor Haruhiko
Kuroda warned on Tuesday against prematurely discussing a
strategy for withdrawing its massive stimulus programme,
stressing that the priority now was to keep flooding markets
with cash to meet the bank's inflation target.
He also called on the government to map out a credible
growth strategy and take measures to boost Japan's long-term
growth potential, as improvements in the economy and an ageing
population have led to labour shortages.
"Talking at an early stage about specific plans for exiting
(quantitative easing) risks confusing markets, as we've seen in
examples overseas," Kuroda told parliament, alluding to the
market volatility caused last May by the Federal Reserve's
suggestion that it would start tapering its massive asset
"We'll need to debate plans on an exit when our 2 percent
price target is achieved in a stable manner. But it's too early
to discuss specifics now," he said.
How to withdraw the massive stimulus, including the tapering
of its government bond purchases, will depend on price and
market developments at the time, Kuroda said.
The BOJ has stood pat on policy since deploying an intense
burst of stimulus in April last year, when it pledged to double
base money via aggressive asset purchases to achieve its 2
percent inflation target in roughly two years.
While private-sector analysts remain sceptical on whether
inflation will accelerate so quickly, Kuroda has repeatedly
voiced confidence that Japan will hit the target sometime during
the next fiscal year beginning in April 2015.
His optimistic tone has led market players to scale back
expectations of a near-term expansion of stimulus. While many
still expect the BOJ's next move to be an easing of policy, most
of them now project the timing to be delayed by several months
to around October, a Reuters poll showed.
Kuroda maintained his bullish view on the economy on Tuesday
but reminded markets that the central bank is ready to ease
again if risks threaten achievement of its price goal.
"We're still half-way through meeting our 2 percent
inflation target," he said.
GROWTH STRATEGY CRUCIAL
Japan's economic recovery has been driven largely by
strength in domestic demand, and has so far weathered the pain
from an increase in the sales tax in April. Consumer inflation
has accelerated, boding well for the BOJ's efforts to end 15
years of grinding deflation.
Core consumer inflation hit 3.2 percent in April from a year
earlier. Excluding the effect of the tax hike, inflation picked
up to 1.5 percent in April from 1.3 percent in March, suggesting
that robust domestic demand is making firms more comfortable
passing on the costs to households.
But real wages, which is adjusted for consumer inflation,
fell at the fastest pace in over four years in April, data
showed on Tuesday, underscoring the challenges of nudging up
inflation without cooling spending.
The BOJ has argued that companies, having seen profits rise
thanks to robust domestic demand and the boost from a weak yen
on exports, will gradually raise wages and help sustain the
strength in consumer spending.
Kuroda reiterated that improvements in the economy have
boosted domestic demand and narrowed Japan's output gap to near
zero. He then warned that such increase in domestic demand has
highlighted the need to address suply constraints that may cap
An ageing ageing population is leading to labour shortages,
while prolonged deflation has forced companies to hold back on
"Japan's potential growth has fallen significantly," Kuroda
said. "It's therefore very important to map out a growth
strategy to boost Japan's potential growth. I'd like to
reemphasise that point," he added.
Kikuo Iwata, one of Kuroda's two deputies, echoed that view,
warning that Japan could be stuck with low growth and mild
inflation if the government's growth strategy stalls.
Iwata also called for bold structural reforms, warning that
without such efforts, Japan may suffer from low economic growth
even if the BOJ's price target was achieved.
(Additional reporting by Stanley White and Kaori Kaneko;
Editing by Chris Gallagher & Kim Coghill)