Tokyo: Tokyo’s choice to lead the Bank of Japan vowed Monday to do “everything possible” to reverse years of growth-sapping deflation, and criticised previous BoJ management for not doing enough to fix the problem.
Haruhiko Kuroda, a finance veteran who has announced his resignation as head of the Asian Development Bank, is widely expected to be confirmed by parliament as Japan’s top central banker in the coming weeks.
The 68-year-old has long criticised the central bank for doing too little to lift the world’s third-largest economy, and is likely to lead a fresh drive for more spending and aggressive monetary easing.
“I want to make it clear that we will do everything possible to get rid of deflation,” Kuroda told a parliamentary committee, adding that his plans included launching “drastic monetary easing”.
Japan has been beset by deflation since the 1990s. It hurts the economy because falling prices lead consumers to delay purchases in hopes of paying less later and cut into corporate profits, leading firms to slash jobs and put off growth-generating capital investment.
Prime Minister Shinzo Abe, whose Liberal Democratic Party swept December elections, has vowed to stoke growth with big spending and aggressive monetary easing.
That put him on a collision course with outgoing BoJ head Masaaki Shirakawa, who is stepping down on March 19, three weeks before the end of his term.
Abe had previously warned Shirakawa that he might change a law guaranteeing the bank’s independence if it did not follow his policies, stirring protest from central bankers abroad.
The under-pressure central bank in January announced an unlimited easing programme to start from next year and a two-percent inflation target aimed at reversing deflation.
The asset purchase policy is similar to the US Federal Reserve’s unlimited monthly bond-buying programme, known as quantitative easing.
Markets have cheered Abe’s efforts, with the benchmark Nikkei 225 index soaring and the yen weakening in recent months, good news for the country’s hard-hit exporters.
But Abe’s prescription for the recession-hit economy has sparked criticism that Tokyo is intentionally pushing down the yen’s value and risking a global currency war as rival nations race to gain a trade advantage — claims repeatedly denied by Tokyo, including by Kuroda on Monday.
He also applauded the new inflation target, seen as more explicit than the bank’s previous “goal” to raise prices, calling it “utterly unprecedented”.
“If appointed, I think that achieving the (inflation) objective at the earliest time is my most important duty,” he added.
But Kuroda said the BoJ’s 101 trillion yen ($1.08 trillion) asset-buying programme fell short.
“The size and items subject to the Bank of Japan’s current asset purchases are not enough,” Kuroda was quoted by Jiji Press as saying.
Masatoshi Sato, senior strategist at Mizuho Securities, said the comments from Kuroda, an Oxford University graduate, showed he was “in tandem with the Abe administration” on economic policy.
“The market is seeing his remarks in a positive light,” Sato told AFP.
“But now we are looking to his first policy meeting (next month) and what he is going to do. The focus is going to gradually shift to results.”
Kuroda’s proposal to buy longer-maturity assets and bring the unlimited asset-purchase plan forward had underwhelmed markets, said Chris Tedder, research analyst at Forex.com in Sydney.
“The comments didn’t tell us anything we didn’t know already,” he said.
In Monday forex trade, the dollar and euro shed initial gains on the yen after Kuroda’s comments. The dollar weakened to 93.38 yen from 93.59 yen in New York Friday, while the European single currency was at 121.52 yen from 121.92 yen.