Bank of Japan Governor Haruhiko Kuroda said the recent pace of growth in the world’s third-largest economy is probably unsustainable and pledged to continue with very accommodative monetary policy “for some time” because the bank is far from its inflation target.
“I think 4 percent growth is excellent, but we don’t think 4 percent growth can be sustained. Around 2 percent growth is likely,” Kuroda said in an interview on Bloomberg Television recorded on Friday in Jackson Hole, Wyoming.
“I think for some time we have to continue this extremely accommodative monetary policy,” he said.
The bank chief, who joined Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi at the mountain retreat for an annual gathering of monetary policymakers, said he is watching moves by global colleagues, but added that Bank of Japan policy has to be aimed at conditions in Japan.
“The economic and price situation in the US is much, much better than the situation in Japan,” Kuroda said in the interview.
He said that Japanese businesses and labor unions still exhibit a “deflationary mindset,” which is crimping price gains.
Like his US and European colleagues, Kuroda is grappling with an economy that is expanding, but still failing to generate significant wage gains and a healthy level of inflation.
At its most recent policy meeting last month, the Bank of Japan pledged to forge on with its program of asset purchases and yield-curve control after delaying the projected timing for reaching its 2 percent price target for a sixth time.
Yet, the bank risks getting out of step with its developed-world peers as it presses on with its unprecedented monetary stimulus while the Fed raises rates and the European Central Bank debates how to start normalizing policy.
In the interview, Kuroda said his yield-curve control program, introduced last year, has been working quite well and that he does not see a need to adjust it at present.
He added that the Bank of Japan is not running out of Japanese government bonds (JGB) to purchase and that the market is still functioning quite well.
“Since JGBs remaining in the market is going to decline, that means that with one unit of JGB purchase, the impact on the interest rate could be bigger,” Kuroda said. “So that in coming months there will be less and less need to purchase JGBs in order to maintain the yield curve.”
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