ADB’s Kuroda favors more BOJ easing

MONETARY STIMULUS::The Asian Development Bank president said the Bank of Japan could use ‘some additional’ measures to achieve its 2 percent inflation target

Bloomberg

Tue, Feb 12, 2013 - Page 5

Asian Development Bank (ADB) president Haruhiko Kuroda, a potential candidate to head Japan’s central bank, signaled that he favors greater monetary stimulus by the Bank of Japan (BOJ) this year.

“Some additional” measures could be justified for this year, Kuroda said in an interview in Tokyo yesterday, stressing that he was speaking in his capacity as an economist and chief of the ADB, not as a BOJ contender. Kuroda, 68, said that the BOJ has “many” tools to achieve its 2 percent inflation target, and that the “global standard” for the horizon to achieve such goals is two years.

Kuroda’s remarks indicate the BOJ would embrace more aggressive steps to end deflation should Japanese Prime Minister Shinzo Abe nominate him to succeed BOJ Governor Masaaki Shirakawa and should he win confirmation in parliament. The BOJ last month announced it would start open-ended asset purchases only in January next year, even as it unveiled a 2 percent inflation target that its own forecasts showed won’t be reached in the coming two years.

Japan’s economy has suffered under a decade and a half of deflation, which has pushed up the real burden of debt, and caused companies and households to put off spending, said Kuroda, a former vice finance minister of international affairs. Falling consumer prices must be “eradicated,” he said.

Economists at banks including JPMorgan Chase & Co and Credit Suisse Group AG see Kuroda as the leading contender to replace Shirakawa next month. The yen has weakened and stocks have climbed since mid-November in anticipation of additional monetary stimulus by the incoming BOJ leadership team.

The yen has fallen about 14 percent in the past three months against the US dollar, to ¥92.67 as of 2:30pm yesterday in Tokyo. The Nikkei 225 Stock Average has climbed about 26 percent over the same period.

Kuroda said that the yen “so far” has been in a “natural adjustment” from an excessive value. He also said that the yen’s depreciation does not come too late to help his nation’s economy, which has seen manufacturers including Sharp Corp and Sony Corp hurt by a surging yen in recent years.

The Japanese government will continue in its efforts to drive the Nikkei to 13,000 by the end of the fiscal year on March 31, Japanese Economy Minister Akira Amari said on Saturday, Kyodo news reported. The Nikkei index closed at 11,153 last week. Japanese markets were closed yesterday for a holiday.

The jump in equities raises the risk of disappointment as Abe prepares to unveil his choice of central bank chief. The government should announce its nominations for the new BOJ leadership team by the end of this month, the ruling Liberal Democratic Party said last month.

Kuroda, who once wrote that the BOJ should set a 3 percent inflation target, was a career bureaucrat who rose to be vice finance minister in charge of currency policy. He has led the Manila-based ADB since 2005.