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BOJ Kuroda says solid U.S. growth may push up dollar, upbeat on global outlook
January 20, 2017 / 10:49 AM / in 9 months

BOJ Kuroda says solid U.S. growth may push up dollar, upbeat on global outlook

DAVOS, Switzerland (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Friday the prospects of faster U.S. growth may push up the dollar, and he offered an upbeat view on the world economy, dismissing concerns that protectionism could spread and undermine global trade.

Haruhiko Kuroda, Governor of the Bank of Japan attends the World Economic Forum (WEF) annual meeting in Davos, Switzerland January 20, 2017. REUTERS/Ruben Sprich

He said Japan’s economy was likely to head toward sustainable growth, but he warned that the country had yet to address major challenges such as anemic wage growth.

“Growth in the U.S. economy is likely to accelerate this year and next year, and price inflation may rise somewhat. All of (this) may make interest rates rise and the dollar might also appreciate,” Kuroda told reporters after a session at the World Economic Forum in Davos, Switzerland.

“But exchange rate movement is very difficult to predict. You cannot say anything definite because exchange rates are affected by so many factors, not just interest rates (and) economic growth,” he said when asked if the dollar could keep rising, helping export-reliant Japan by weakening the yen.

Kuroda dismissed concerns that incoming U.S. President Donald Trump’s policies and European elections this year could trigger a global tide of protectionism and hurt world trade.

“Most countries, including the G7 and G20 major economies ... are strongly committed to promoting global trade, and so can help prevent protectionism from spreading,” he said.

“It would be very problematic if protectionism spreads, but I don’t think that will happen,” said Kuroda, formerly head of the Asian Development Bank.

JAPAN RECOVERY INTACT

On Japan, Kuroda said the country’s top policy priority was to overcome deflation. The major challenges are to heighten inflation expectations and prod firms to raise wages, he said.

“Firms have remained cautious about wage increases, which is one reason why inflation hasn’t been gathering momentum,” he told a session on the global economic outlook.

But Japan’s economy is likely to expand 1.5 percent both in the fiscal year ending in March and in the following year, he said, citing a rebound in global demand.

“Japan’s economy has shown clear signs of recovery in exports and industrial production,” he said.

Kuroda’s optimistic comments on recovery prospects suggest the BOJ will maintain its upbeat economic and price forecasts when its nine-member board conducts a quarterly review of projections on Jan. 30-31.

The growth projections Kuroda offered are higher than the BOJ board’s median forecasts for a 1.0 percent expansion this fiscal year and 1.3 percent the following year.

It is rare for a BOJ governor to offer specific growth projections that vary from the BOJ board’s median forecasts ahead of the quarterly forecast review.

Kuroda later clarified to reporters that the projections were his personal views and not representing the forecasts of the BOJ board.

Additional reporting and writing by Leika Kihara in Tokyo; Editing by Jacqueline Wong and Hugh Lawson

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