The Bank of Japan (BOJ) will start thinking about how to exit its massive monetary stimulus program around the fiscal year starting in April 2019, Governor Haruhiko Kuroda said yesterday, marking the first time he has provided any clear guidance on timing for normalizing policy.
The yen surged, gaining as much as 0.5 percent to ￥105.71 per US dollar, while yields on Japanese sovereign debt climbed across the curve. The Nikkei 225 closed 2.5 percent lower and the TOPIX fell 1.8 percent.
“Right now, the members of the policy board and I think that prices will move to reach 2 percent in around fiscal 2019. So it’s logical that we would be thinking about and debating exit at that time too,” he said. “I’m not saying that the negative rate of 0.1 percent and the around 0 percent aim for 10-year bond yields will never change, but it is possible. We will be discussing that at each policy meeting.”
“Kuroda’s comments are important because he officially acknowledged a change in policy was likely before the end of FY2019,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd in Sydney. “Technically, however, this shouldn’t come as a surprise as core inflation is expected to reach 2.3 percent by then.”
With the US Federal Reserve already raising rates and the European Central Bank debating normalization, Kuroda has been under increasing pressure to provide details on when the BOJ might follow suit.
“The bottom line — the BOJ’s policy hasn’t shifted,” Bloomberg Economics’ Yuki Masujima said. “Kuroda has essentially connected the dots between two existing positions: The BOJ has been forecasting that inflation will reach 2 percent around fiscal 2019. It’s also said that it would continue easing until it achieves its inflation target.”
Earlier yesterday, official data showed that Japan’s jobless rate stood at 2.4 percent in January, the lowest in nearly 25 years, a major boost for the world’s third-largest economy.
The figure — the lowest since April 1993 when the rate hit 2.3 percent — comes as Japan has notched up eight straight quarters of economic growth, the longest positive run since the “bubble” boom days of the late 1980s.
Additional reporting by AFP
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