YOKOHAMA, Japan (Reuters) - A Bank of Japan board member who voted against adopting the central bank’s new inflation target said on Thursday a deadline for reaching it should not be set, in contrast to the expected new governor’s view that the goal could be met in two years.
Takahide Kiuchi also said the BOJ’s asset-buying program should remain the key means for monetary easing, expressing reservations about widening the scheme to include longer-dated bonds too soon, which he said could be seen as monetizing debt.
The comments from Kiuchi, a former economist who joined the nine-member board in July, suggest Prime Minister Shinzo Abe’s plan for a radical overhaul of policymaking at the central bank may still face some resistance.
“Achieving 2 percent inflation isn’t easy. It won’t be achieved quickly and would need a considerable amount of time,” Kiuchi told a news conference after meeting business leaders in Yokohama, near Tokyo, on Thursday.
“It’s undesirable to set a timeframe for when to achieve the target. No major central banks in the world have a pre-set timeframe for achieving their price goals,” he said.
On Thursday, Abe nominated Asian Development Bank President Haruhiko Kuroda, an advocate of aggressive policy who has said the 2 percent inflation target could be reached in two years, as the next head of the BOJ.
In an earlier speech, Kiuchi said the BOJ would consider easing policy again via further asset purchases if needed.
“There’s still uncertainty on whether Japan’s economy will head for a full-fledged recovery,” he said, pointing to risks such as persistent market jitters over Europe’s debt woes.
At present, the BOJ targets government bonds with maturity of up to three years under the asset-buying and lending program, its key monetary easing tool.
It purchases longer-dated bonds in a separate, regular market operation dubbed “rinban,” though sets a self-imposed rule of limiting the balance of its bond holdings to the amount of bank notes in circulation.
Some in the BOJ have floated the idea of buying longer-dated bonds to nudge down the longer end of the yield curve.
Kiuchi said this could be a future possibility, but that in doing so the BOJ might need to overhaul the way it bought assets and review the self-imposed cap on bond holdings.
“This may be something we need to think about, although it’s not an imminent task,” he told the news conference.
Under pressure from Abe to take bolder efforts to beat deflation, the BOJ last month doubled its inflation target to 2 percent and made an open-ended pledge to buy assets from next year.
Kiuchi and Takehiro Sato voted against adopting the new inflation target, saying it far exceeded sustainable levels.
On Thursday, Kiuchi said his vote reflected his view that the central bank should first do its utmost to achieve its prior target of 1 percent inflation.
($1 = 91.6050 Japanese yen)
Editing by John Mair