* BOJ says inflation expectations helps spurs growth
* Massive stimulus policy achieving intended results
* Exiting QQE program still too premature - BOJ governor
By Suleiman Al-Khalidi
DEAD SEA, Jordan, June 7 Bank of Japan Governor
Haruhiko Kuroda said on Saturday a massive stimulus policy
introduced a year ago had achieved its goal of boosting the real
economy, lifting growth and ending deflation but said a 2
percent inflation of two years could take more time to achieve.
He said that the its ultra-easy monetary QQE (quantitative
and qualitative easing) policy introduced last April when the
BOJ pledged to double base money via aggressive asset purchases
to accelerate consumer inflation to 2 percent in roughly two
years had attained its goals.
"One year has passed ...the policy has been having the
intended effects leading to an improvement in financial markets,
the real economy, prices," Kuroda told an audience attending the
17th world congress of the International Economic Association
held in Jordan.
On whether it was possible meet the two-year inflation
target, one year into the stimulus plan, Kuroda hinted it could
"When the BOJ introduced QQE we declared we would intend to
achieve a 2 percent inflation target basically within two years
time," Kuroda said.
"The policy of QQE will be maintained and will be continued
until we achieve the 2 percent inflation target and also
maintain a 2 percent inflation in a sustainable manner so it may
take more than two years if necessary and anyway we are only
half way," Kuroda said
The BOJ governor said the "large-scale monetary easing" had
led to peoples' inflation expectations rising on the whole."
Excluding the effect of the tax hike, inflation accelerated
to 1.5 percent in April compared with year-on-year a negative
0.5 percent excluding fresh food in March last year, Kuroda said
Kuroda said the "bank's massive purchases of JGB have kept
10-year government bonds yields at a low level of about 0.6
Exiting QQE could carry risks and was premature now, he
The BOJ under the QQE will continue purchasing long-term
government bonds "with average maturities of six to seven years"
until the 2 percent inflation target was met," Kuroda said.
"So discussing exiting strategy, how to exit and when to
exit is certainly too premature although I can say there are
many options and ways to gradually exit from QQE in coming
months," he added.
Kuroda said the Japan's economic growth was led by domestic
demand, with the policy of BOJ "to encourage a decline in real
interest rates through raising inflation expectations
and thereby stimulate the real economy."
"As a result real interest rates have been negative and
continue to decline, thereby providing stimulus to the
"Radically changing inflation expectations among the private
households" would revive private demand, particularly
investments as well as consumption that had experienced sharp
downturns after the Lehman crisis," Kuroda said.
Although the government could achieve its objective of
eliminating Japan's primary deficit by 2020, rising overall debt
posed a long-term problem for policy makers, Kuroda.
"So we don't see excessive private sector debt accumulating
overhang or whatever, the problem is only the government which
continues to have large debt GDP now is more than 200 percent
and the government has belatedly started to reduce fiscal
deficit.., Kuroda said.
"Even if the government objective of eliminating the primary
deficit by 2020, even if that is achieved, debt will continue to
rise and that could be a serious problem for the government as
well as the economy," he warned.
(Reporting by Suleiman Al-Khalidi; Editing by Lisa Shumaker)