Haruhiko Kuroda, Tokyo’s pick to head the Bank of Japan (BOJ), yesterday ruled out purchases of foreign bonds to stoke the economy, as the country faced criticism it was engineering a yen devaluation.
Some politicians and economists have said the central bank should adopt such measures as a policy option, which would likely push the value of the yen down further as it would require selling huge amounts of the unit to purchase foreign-denominated debt.
That could aggravate months-long criticism from abroad, particularly in Europe, that Tokyo was devaluing the unit to help exporters, risking a global currency war that would see rival nations try to push down their currencies.
Kuroda, currently president of the Asian Development Bank, told a parliamentary confirmation session yesterday that “there is no need to consider” foreign-bond buying as a policy option.
“It is the government’s responsibility to achieve stability in foreign exchange markets,” Kuroda added.
“It is not part of the BOJ’s duty as a central bank. Its duty is to stabilize prices,” he said.
The BOJ routinely buys Japanese government bonds as a way to inject easy money into the market to help lift the economy, in a move similar to the US Federal Reserve’s quantitative easing program.
Kuroda also said under his stewardship, the BOJ would move to meet a 2 percent inflation target that policymakers adopted in January, aimed at reversing years of falling prices that have crimped private spending and business investment.
The longtime BOJ critic said previous efforts by the bank to stoke the world’s third-largest economy have fallen short.
“Since monetary-easing actions so far haven’t been sufficient, I will take every measure possible to achieve a 2 percent target if approved as governor,” Kuroda said.
Tokyo shares closed 0.53 percent higher yesterday thanks to a weakening yen and as traders followed another record finish for the Dow on Wall Street.
The benchmark Nikkei 225 index gained 65.43 points to 12,349.05, while the TOPIX added 1.91 percent, or 19.48 points, to 1,039.98.
Investors largely shrugged off a 13.1 percent month-on-month drop in January machinery orders. The key leading indicator declined for the first time in four months and suggested manufacturers were holding off making new investments.
The market was tipped to trend higher on continued weakness of the yen against the US dollar, particularly after US jobs data came in better than expected on Friday, analysts said.
The yen was under pressure in Asia yesterday as Kuroda repeated his vow to ramp up monetary easing.
In Tokyo afternoon trade, the greenback bought ￥96.10, against ￥95.97 in New York late on Friday, while the euro also strengthened at ￥125 from ￥124.83.
“With the US economy looking like it’s on a firm recovery track, investors are pricing in a dollar-yen target of 98-100,” SMBC Friend Securities head of investment and research Fumiyuki Nakanishi told Dow Jones Newswires.