DAVOS, Switzerland- Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will continue its current “extremely accommodative” monetary policy to achieve its 2 percent inflation target in a stable, sustainable manner.
“Our hope is that wages will start to rise, and that could make our 2 percent inflation target met in a stable and sustainable manner. But we have to wait” for some time, he told a panel at the World Economic Forum (WEF) annual meeting.
Kuroda said the BOJ’s decision to widen the band around its 10-year bond yield target was “perfectly right,” brushing aside criticism that the move failed to iron out market distortions, and instead fueled speculation of additional tweaks to its yield curve control (YCC) policy.
Japan’s core consumer prices in December rose 4.0 percent from a year earlier, double the central bank’s 2 percent target, hitting a fresh 41-year high and keeping alive market expectations the central bank could phase out ultra-low interest rates.
Kuroda said December’s rise in inflation was largely caused by higher import costs, adding that consumer inflation will likely start to slow from February and will be less than 2 percent on average in the fiscal year that begins in April.
“All in all, the government’s policy, coupled with the BOJ’s extremely accommodative policy, have been successful in changing Japan’s economic structure and growth prospects,” he said.
“But our 2 percent inflation target has not been achieved in a sustainable, stable manner,” he said. “That is the only regret I have,” Kuroda said, speaking of his decade at the BOJ helm that will end when his term expires in April.
Meanwhile, a leading indicator of Japanese consumer prices likely rose in January at more than twice the speed of the central bank’s target, hitting another four-decade-high, a Reuters poll showed.
Inflation data in the world’s third-largest economy has received unusual attention amid market expectations of a shift in the Bank of Japan’s (BOJ) ultra-easy monetary policy.
The core consumer price index (CPI) in Tokyo was seen rising 4.2 percent in January from a year earlier, according to the median estimate of 19 economists.
That would mark the eighth straight month of price acceleration and the fastest year-on-year increase since the 4.2 percent rise in April 1982.
“Inflation likely stayed elevated in January since the effect of the stimulus package, which depresses energy prices, will not fully kick-in until February,” said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, referring to fiscal measures to curb household inflation.
Tokyo’s core CPI, which is released three to four weeks ahead of the nationwide inflation data, showed a downwardly revised 3.9 percent rise in December. – Reuters
