July 15 (Reuters) - 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:
”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 year.
”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 outlook.
”While the effects from energy prices begin to fade, the downward pressure from this will be offset by tightening labour market conditions.
”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 percent.”
”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 strong.”
”Excessive yen rises have pretty much been reversed, so companies aren’t shifting production overseas as much as in the past.
”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.”
”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