BoJ chief: Fed rate hikes good for global econ­omy

Gulf Times Business - - BUSINESS -

Bank of Ja­pan gov­er­nor Haruhiko Kuroda said yes­ter­day steady in­ter­est rate hikes by the Fed­eral Re­serve were “ba­si­cally good” for the world econ­omy, shrug­ging off con­cerns that higher US rates could hurt Asian economies by trig­ger­ing cap­i­tal out­flows.

Kuroda, how­ever, was more cau­tious about the risks posed by es­ca­lat­ing trade ten­sions, which he de­scribed as of a “rather un­usual” scale and a “new de­vel­op­ment” for the global econ­omy.

He also said an age­ing pop­u­la­tion could pose struc­tural chal­lenges for cen­tral banks, as it un­der­cuts their economies’ growth po­ten­tial and re­quire them to use more mone­tary fire­power than be­fore to re­flate growth.

The In­ter­na­tional Mone­tary Fund’s steer­ing com­mit­tee warned ear­lier on Satur­day that tighter fi­nanc­ing con­di­tions were among risks that could af­fect many emerg­ing and de­vel­op­ing coun­tries.

Kuroda, how­ever, said higher US rates were pos­i­tive for the global econ­omy be­cause the Fed’s pol­icy nor­mal­i­sa­tion showed the US econ­omy was in good shape. “It’s good that the United States is nor­mal­is­ing mone­tary pol­icy, be­cause the econ­omy is grow­ing and in­fla­tion is al­ready near (the Fed’s) tar­get,” Kuroda said at a sem­i­nar hosted by IMF dur­ing the an­nual meet­ings of the fund and the World Bank in the In­done­sian re­sort is­land of Bali.. “Grad­ual nor­mal­i­sa­tion with a clear state­ment of (the Fed’s) in­ten­tion and fu­ture pol­icy... That’s ba­si­cally good for the world econ­omy.”

Kuroda said the BoJ was fac­ing a dif­fer­ent chal­lenge than that of the Fed as it was tak­ing longer to achieve its 2% in­fla­tion tar­get, re­it­er­at­ing his re­solve to main­tain a mas­sive stim­u­lus pro­gramme in Ja­pan for the time be­ing.

An age­ing pop­u­la­tion may also pose “se­ri­ous chal­lenges” for many coun­tries as it could re­quire cen­tral banks to cut rates more than be­fore to boost their low-growth economies, he said.

“Age­ing so­ci­ety is seen not only in Ja­pan but in many Eu­ro­pean and emerg­ing coun­tries.

It’s be­com­ing a com­mon chal­lenge,” Kuroda said. “An age­ing pop­u­la­tion tends to re­duce medi­umterm growth po­ten­tial... This would make mone­tary pol­icy more chal­leng­ing in the fu­ture.”

Bank of Ja­pan gov­er­nor Haruhiko Kuroda said the BoJ was fac­ing a dif­fer­ent chal­lenge than that of the Fed as it was tak­ing longer to achieve its 2% in­fla­tion tar­get, re­it­er­at­ing his re­solve to main­tain a mas­sive stim­u­lus pro­gramme in Ja­pan for the time be­ing.

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