July 15 The Bank of Japan maintained its
stimulus programme on Tuesday and stuck to its forecast that
inflation will approach its 2 percent target next year, unfazed
by recent data casting doubts over its scenario of an
investment-led economic recovery.
Following are comments from BOJ Governor Haruhiko Kuroda at
his post-meeting news conference:
QE EXIT STRATEGIES
"The Fed and the BoE appear to be heading towards an exit
earlier than other major central banks. There will probably be
something to learn from their exit strategies.
"But Japan and the United States each have their own
appropriate means and timing for when to exit, reflecting their
economic and financial conditions.
"So it's not a case where other central banks will
automatically follow the Fed's footsteps."
"There is a possibility that the unconventional monetary
policy steps taken by major central banks, including QE, have
something to do with low market volatility.
"Prolonged periods of traditional and non-traditional
monetary easing risk causing excessive 'search for yield' among
investors, which central banks in each country are well aware of
... As for Japan, I don't think there is such a trend."
"Annual consumer inflation will hover around 1.25 percent,
before picking up again in the latter half of the current fiscal
"I don't think there is a possibility that consumer
inflation will fall below 1 percent.
"Some on the board voiced a more cautious view on the price
"While the effects from energy prices begin to fade, the
downward pressure from this will be offset by tightening labour
"The two factors will offset each other, keeping consumer
inflation around 1 percent. But as the effects from energy
prices begin to disappear, price rises will begin to accelerate.
"Price rises are broadening and are expected to continue
broadening, allowing for consumer inflation to diverge towards 2
CORPORATE PRICING BEHAVIOUR
"We're clearly seeing a shift in trend where companies,
instead of cutting prices, are trying to heighten the quality of
their goods to sell them at higher prices. We need to carefully
watch whether this trend will be sustained.
"We're seeing rises in wages and prices. I therefore think
fewer companies will continue to resort to the type of price
competition they deployed in times of deflation."
"Japan's economy is likely to grow above its potential in
the current fiscal year and the subsequent two years.
"It's true that in the medium- to long-term perspective, a
country's economic growth is determined by production capacity
so efforts to boost production capacity are necessary."
"Domestic demand, including capital expenditure, remains
firm as a trend. A virtuous cycle in economic activity clearly
remains in place.
"Companies expect to increase spending, reflecting increases
in sales and profits. Corporate appetite for spending remains
"Excessive yen rises have pretty much been reversed, so
companies aren't shifting production overseas as much as in the
"The recovery in exports is being delayed somewhat. But we
expect exports to recover ahead, albeit gradually.
"In general, the currency of a country that is tightening
monetary policy, be it through traditional or non-traditional
means, tends to rise, while the currency of a country that is
easing policy tends to fall.
"In the United States, monetary policy isn't heading towards
further easing and is rather heading towards a taper (of asset
purchases) and an interest rate hike.
"On the other hand, in Japan, we're only halfway through in
meeting the 2 percent price target and we will maintain QQE
until the price target is stably met. If that's the case, I see
no reason for the yen to strengthen against the dollar."
SALES TAX HIKE
"The downturn in spending after the sales tax hike is
roughly within expectations.
"We need to remain vigilant on how the decline in real
incomes due to the sales tax hike affects consumption. But we
expect household spending to remain firm, reflecting
improvements in job and income conditions.
(Reporting by Leika Kihara, Stanley White and Tetsushi
Kajimoto; Editing by Edmund Klamann)