Haruhiko Kuroda said he wants 2 percent inflation in two years and pledged to buy more government bonds, underscoring the new Bank of Japan (8301) chief’s efforts to accelerate an end to falling prices.
“Achieving the 2 percent inflation target in two years is something that I have in my mind,” Kuroda said today in Parliament. He said the BOJ may scrap a rule limiting the scale of asset buying and consider purchasing more bonds with longer maturities.
The comments spurred investors’ expectations for more monetary easing, with the yen weakening and benchmark bond yields falling to a near 10-year low. Analysts at banks from JPMorgan Chase & Co. to Barclays Plc expect the BOJ to add stimulus as soon as the next policy meeting on April 3-4.
The Japanese currency was 0.2 percent weaker at 94.31 per dollar as of 11:18 a.m. in Tokyo, extending its nearly nine percent fall since the start of the year. The Nikkei 225 (NKY) Stock Average was 0.2 percent lower, while the yield on Japan’s 10- year government bond touched 0.525 percent, the least since June 2003.
Kikuo Iwata, one of two new BOJ deputy governors, told reporters last week that the central bank should commit to achieving the target for consumer-price increases within two years. He has suggested that the BOJ leadership should be prepared to resign if they fail to meet that goal.
Kuroda, who took up his post last week, today reiterated his pledge to do “whatever it takes” to end more than a decade of deflation in Japan, saying that expectations for rising prices would be positive for the world’s third-largest economy.
“It’s a strong pledge from a well-intended man, but I’m not convinced it’s going to work,” Stephen Roach, a senior fellow at Yale University and former non-executive chairman for Morgan Stanley in Asia, said in a Bloomberg Television interview earlier today. “It’s going to take a lot more to bring Japan out of its long slump than just another effort at quantitative easing.”
The BOJ currently buys bonds, as well as exchange-traded funds and other risk assets, through a fund targeted to reach 76 trillion yen ($805 billion) by the end of this year.
The BOJ has pledged to keep the value of its bond holdings, excluding the asset-purchase fund, below the amount of cash in circulation.
Consumer-price gains “will never reach 2 percent,” Eisuke Sakakibara, Kuroda’s direct predecessor as Japanese vice finance minister in charge of currency policy in the 1990s, said in a Bloomberg Television interview this month. “This deflation is structural. It’s a result of the integration of the Japanese economy with the rest of east Asia and it has taken place for the last 20 years.”
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