November 11, 2015 / 2:36 AM / 4 years ago

UPDATE 2-BOJ's Harada says must top up stimulus if overseas risks hurt jobs

* Defends effect of BOJ’s stimulus programme

* Expects CPI to hit 2 pct by March 2016-Harada

* Adds BOJ shouldn’t rush in hitting price target

* China slowdown, Fed rate hike are risks to outlook (Adds quotes from news conference)

By Leika Kihara

UTSUNOMIYA, Japan, Nov 11 (Reuters) - Bank of Japan board member Yutaka Harada said the central bank should ease monetary policy further if overseas risks hurt job growth and threaten to derail a broad uptrend in inflation, stressing that it has plenty of tools left available to jump-start growth.

The former academic said there was no immediate need to deploy additional stimulus since inflation was expected to accelerate toward the BOJ’s 2 percent target by around March next year as the effect of slumping oil costs dissipate.

But he said the BOJ must act if a tightening job market fails to ignite wage hikes, threatening a recovery in private consumption and capital investment.

“I don’t think we need to deploy stimulus immediately just to quicken the pace of inflation,” Harada told reporters on Wednesday after meeting with business leaders in Utsunomiya, eastern Japan.

“If the (delay) is due to oil price falls, the BOJ doesn’t need to act. But it does need to act if the mechanism, in which rising household income spurs consumption, is disrupted.”

The remarks suggest Harada won’t get in the way of Governor Haruhiko Kuroda if he were to propose easing again, unlike some in the nine-member board who have become wary of the rising costs and diminishing returns of the stimulus programme.

Harada said there was “no limits” to the BOJ’s policy options if it were to ease again, countering critics who say the bank - already buying up nearly the same volume of secondary market bonds as the government issues each month - may soon run out of bonds to buy.

In his first full-fledged speech since joining the board in March, Harada defended the BOJ’s massive stimulus programme, stressing that it has boosted corporate profits and job growth by weakening the yen and brightening business sentiment.

While full-time workers’ wages rose only 1.2 percent since the BOJ introduced its stimulus programme in April 2013, wages of part-time workers jumped 3.8 percent in a sign household income was rising as more people joined the workforce, he said.

The BOJ cut its inflation forecasts on Oct. 30 and pushed back the timing for hitting its price target by six months. But it held off on expanding stimulus, blaming sluggish price growth mostly on the effect of falling energy costs.

The bank remains under pressure to ease again as Japan’s economy skirts recession and sluggish overseas demand weighs on exports.

Harada said Japan’s recovery may falter if China and other emerging economies see growth slow further, or if an expected U.S. interest rate hike triggers an unintended market shock.

“It’s true there is a risk the economy may lose momentum... But for now, Japan’s economy is recovering moderately,” he said. (Reporting by Leika Kihara; Editing by Eric Meijer)

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