BANK of Japan (BoJ) governor Haruhiko Kuroda came out fighting yesterday, giving a spirited defence of the economy’s performance after a run of weak data and reiterated his readiness to expand stimulus if inflation faltered on the path to his two per cent target rate.
“The BoJ is not aiming at achieving the price stability target of two per cent temporarily. What it aims at is to achieve an economy in which inflation is about two per cent on average year after year,” he said, signalling that the central bank will not exit from its ultra-loose stimulus any time soon.
“I would like to emphasise that... given the BoJ’s clear and strong commitment to the two per cent inflation target, it is a matter of course the BoJ will make adjustments if necessary to ensure the target is met,” Kuroda said at a seminar.
He stressed that the BoJ will vigilantly monitor how a decline in real income affects consumer spending.
Kuroda said an increase in summer bonus payments to workers would help consumer spending recover from an increase in the sales tax in April, while labour and supply constraints meant companies were expected to keep raising wages.
“A positive cycle of output, income and expenditure is firmly in place, so we can say Japan’s economy continues to recover moderately as a trend.”
There were signs, he said, that companies were ready to increase domestic investment after holding back spending on plant and equipment during a prolonged period of deflation.
Kuroda was also upbeat on the outlook for exports, which have remained weak to the disappointment of policymakers, saying that the current sluggishness was due largely to cyclical factors, such as a lack of vigour in emerging Asian markets.
“We expect exports to increase moderately reflecting improvements in overseas economies,” he said.
Such positive economic developments would help accelerate consumer inflation toward the BoJ’s price target, Kuroda said.
He tempered his confidence in the economy with a clear message that the BoJ is willing to take further steps if risk factors damage the outlook for growth and inflation.
“The BoJ will maintain quantitative and qualitative easing to achieve two per cent inflation in a stable manner. If risks arise in the midst of this process, we will adjust policy without hesitation and in doing so, we have various options still available,” Kuroda said. Reuters