Bank of Japan (BOJ) Governor Haruhiko Kuroda said the bank will not set a time limit for easing and will continue until it achieves sustainable inflation.
“It is not appropriate to say that the monetary easing will only last for two years,” Kuroda said in a speech in Tokyo yesterday. “The bank will continue with monetary easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary.”
The yen weakened to the lowest level since April 2009 on Thursday after Kuroda said this week he had taken all necessary measures for now to achieve 2 percent inflation in two years.
Goldman Sachs Group Inc boosted its outlook on Japanese shares on the Bank of Japan’s “credible commitment” to beat deflation, with the Nikkei 225 Stock Average up almost 30 percent this year.
The bank may upgrade its inflation forecast for the next fiscal year to 1.5 percent at its meeting on April 26, according to people familiar with the central bank’s discussions, who asked not to be identified because the talks were private.
“In our view, the latest decisions include all the necessary measures to achieve the 2 percent target” within two years, Kuroda said in his first speech since becoming governor last month.
The bank “will not hesitate to make adjustments as appropriate,” he said.
Kuroda said the bank and the government had agreed that they share responsibility for reinvigorating the country’s torpid economy, which included fiscal restructuring.
“We strongly expect the government to move on that front,” he said.
“It is vital for the government to clearly show the future course of fiscal consolidation and steadily make progress to reform fiscal structures,” he said
At his first policy meeting last week, Kuroda pledged to double the monetary base in two years by buying about ￥7.5 trillion (US$75.5 billion) of bonds a month, equivalent to about 70 percent of new government bond issuances.
Such unprecedented asset purchases have increased volatility in the market.
The yield on the 10-year bond touched a record low of 0.315 percent on April 5, the day after the bank’s policy announcement, and then surged to almost double that level in the same session. Also that day, shifts in bond futures triggered circuit breakers on the Tokyo Stock Exchange.
Benchmark 10-year bond yields were 0.620 percent at 3:23pm in Tokyo. The yen was at ￥99.43 per US dollar, down about 13 percent for the year.
The bank’s purchases of bonds might not be processed smoothly, as they go beyond the market’s convention, Kuroda said, and called for the cooperation of market participants.
In an effort to explain the new policy, the bank held a meeting with representatives of financial institutions on Thursday and separately announced schedules of bond auctions.
Additional reporting by AFP