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TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda, who has been
nominated by the government to serve as the central bank chief for a second
five-year term, made the following points Tuesday at his confirmation hearing
held by Upper House Steering Committee. Kuroda's current term ends on April 8.
-- Kuroda said his previous comments made Friday at a hearing at the Lower
House Steering Committee didn't mean that the BOJ would start unwinding
large-scale easing in fiscal 2019. He said his point was that if the 2%
inflation target was achieved in fiscal 2019, as forecast by the majority of the
BOJ board, the BOJ would debate an exit strategy around that time.
-- Repeating his earlier remarks, Kuroda said debating an exit strategy way
before there are signs of inflation reaching the bank's 2% inflation target
"would confuse financial markets" as the specifics of unwinding large-scale
monetary stimulus will depend on growth and price conditions at the time. He
added that the BOJ would present its exit strategy "at an appropriate time."
Kuroda noted two key points to be considered in the process of unwinding easing:
how the BOJ will raise the short-term interest rate from -0.1% and how it will
reduce its expanded balance sheet.
-- Kuroda repeated the bank's assessment that Japan is still far from
achieving the 2% price target but said "the BOJ board expects the 2% target will
be achieved around fiscal 2019." He stressed that achieving the 2% target
remains the top priority for the central bank which has "regrettably" failed to
do so after conducing aggressive easing for nearly five years.
-- Asked to describe a situation that is not deflationary, Kuroda replied
that wage hikes backed by rising corporate profits as well as improving labor
market conditions are the key to preventing Japan from slipping back into
deflation. He said the 2% inflation target would not be achieved without
continued annual average wage hikes of at least 3%.
-- On whether the BOJ will need to reduce its huge holdings of JGBs to zero
at the end of the eventual exit from large-scale easing, Kuroda said the BOJ
doesn't need to lower the balance of its bond holdings to zero and that he has
no plans to convert the bank's JGB holdings into perpetual bonds. He also said
he could not imagine a situation under which the BOJ would run out of JGBs to
buy. The BOJ already holds about 40% of the outstanding balance of government
-- Kuroda said that at this point the BOJ is unlikely to raise the negative
interest rate from -0.1% or will suspend the negative interest rate policy,
although that an adjustment of the negative interest rate would be possible in
line with developments in inflation.
-- Kuroda repeated that achieving the 2% inflation target, which the BOJ
sees as a global standard, should help stabilize foreign exchange markets "in
the long run." (BOJ officials have explained that targeting a lower inflation
rate, like 1%, would trigger an unwanted rise in the yen and run counter to
Japan's bid to reflate the economy.)
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: email@example.com
--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: firstname.lastname@example.org
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