Bank of Japan Governor Kuroda speaks during a news conference at the BOJ headquarters in Tokyo

BOJ Kuroda says no need to ease further now, defends QQE

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By Leika Kihara

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Friday he did not see any immediate need for further monetary easing as the broad trend of inflation is improving steadily.

He also rejected the need to review the two-year timeframe for hitting the bank’s 2 percent inflation target as it served as a crucial transmission channel of its stimulus program.

“The deadline we set and our clear commitment to do whatever is necessary (to achieve the target) has significantly changed inflation expectations of companies and households,” Kuroda told a seminar.

While the timing for achieving 2 percent inflation has been delayed somewhat by the effect of oil price falls, a broad trend of inflation continues to recover reflecting improvements in the economy, he said.

“I therefore don’t think additional monetary easing is necessary at this stage,” he added.

Kuroda’s confidence around achieving the inflation target jars with a majority view in the market that the goal set by the central bank is too ambitious. Analysts see further easing in the second half of the year to shore up prices.


In adopting “quantitative and qualitative easing” (QQE) in 2013, the BOJ pledged to achieve 2 percent inflation in roughly two years through aggressive asset purchases.

But slumping oil costs and weak consumption ground inflation to a halt, forcing the BOJ to push back the expected timing for hitting its price target. It now says inflation will hit 2 percent by around September next year.

Kuroda said the BOJ’s two-year timeframe was a long-term commitment and different from its price forecasts, which are swayed by short-term market moves.

“It’s taken for granted among major central banks that the inflation rate could deviate from price targets due to changes in commodity prices,” he said, pointing to U.S. and euro-zone inflation that have also been pressured by oil moves.

Some BOJ policymakers, however, doubt whether inflation will accelerate as quickly as Kuroda argues even when the oil effect disappears, as wage growth is slow and consumption remains soft.

In response to growing doubts over QQE, Kuroda said the stimulus heightened long-term inflation expectations by around 0.5 percentage point and slashed real interest rates by 1 point.

“The policy effects of QQE are such that they are roughly equivalent to those that would arise from conducting a 0.25 percent interest rate cut almost ten times,” he said.

(Additional reporting by Stanley White; Editing by Chang-Ran Kim, Shri Navaratnam and Simon Cameron-Moore)


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