BOJ Kuroda resolute in fight against deflation

BOJ Kuroda resolute in fight against deflation
Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo November 19, 2014.

NAGOYA/TOKYO, Japan - Bank of Japan Governor Haruhiko Kuroda on Tuesday stressed the bank's readiness to expand stimulus further to meet its price goal, a message that was partially echoed by an European Central Bank policymaker as the euro zone economy battles to lift off.

In a speech to business leaders, Kuroda stood firm in the face of criticism that last month's unexpected monetary easing has accelerated unwelcome falls in the currency, saying that the "BOJ will continue to take action" to vanquish deflation.

But not all in the BOJ's nine-member board share Kuroda's optimism that the benefits of further stimulus outweigh the costs, minutes of last month's meeting showed, suggesting that the central bank chief may struggle to push through more easing.

Some BOJ policymakers opposed last month's easing, warning that doing so would hurt the BOJ's credibility if its bond-buying is seen as tantamount to debt monetisation, according to minutes of the BOJ's Oct. 31 meeting released on Tuesday

Nonetheless, Kuroda defended the Oct. 31 easing as a necessary step to ensure the Japanese public shakes off its "deflationary mindset," and to encourage companies to start investing and hiring more on expectations that prices will rise ahead.

"To achieve the price stability target, the BOJ has been taking 'action' and will continue to do so," he told business leaders in Nagoya, a central Japan city home to auto giant Toyota Motor Corp.

While business executives present at the meeting generally welcomed the BOJ's stimulus, some warned that recent yen declines were too rapid and were hurting smaller companies.

Kuroda declined to discuss how recent yen falls affected the overall economy, only saying that while a weak yen benefits exports, it hurts households and non-manufacturers by raising the cost of imports.

"We will carefully watch market moves, including currency moves, and their effect on the economy."

The yen has come under renewed pressure since the BOJ stunned markets by expanding its quantitative and qualitative easing (QQE) programme last month. The dollar is hovering around 118.44 yen on Tuesday, after scaling a seven-year high of 118.98 yen last week.

Last month's monetary easing was decided by a tight 5-4 vote after intense debate over why the BOJ ought to expand stimulus when it was clinging to the view the economy was recovering.

Since that meeting, economic data showed that Japan slipped into recession, and three of the four board members who opposed extra easing voted in favour at the subsequent meeting on Nov. 18-19.

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