BoJ holds off fresh stimulus

Revises up exports, output assessment

TOKYO: Bank of Japan governor Haruhiko Kuroda said yesterday that he saw no immediate need to expand monetary stimulus again, stressing that temporary pressure from the oil price slump wouldn’t derail steady progress towards reaching his 2% inflation target.

But he said the BoJ would determinedly ease policy further if his inflation plan was disrupted by risks such as a weakening economy or a continuing decline in oil prices.

“I don’t think there is any change in the price trend at the moment. That’s why I don’t think there is a need to do something additional,” Kuroda told a news conference after a rate review.

“If there is any change in the price trend, we won’t hesitate to adjust policy.”

Kuroda made the remarks after the BoJ, as widely expected, maintained its stimulus programme that pledges to print money at an annual pace of 80 trillion yen ($675 billion).

Japan’s economy pulled out of recession in the final quarter of last year but the rebound was much weaker than expected as the chilling effect on households from last April’s sales tax hike lingered.

The BoJ acknowledged that household spending is sluggish in some areas but held its position, namely: The economy is recovering moderately and Japan is on track to meet its price target as companies raise wages and spending.

It also revised up its assessment of exports and output to say they were “picking up,” encouraged by signs a weak yen was finally helping to lift overseas shipments.

Kuroda dismissed complaints by some opposition lawmakers that last October’s expansion of stimulus was counter-productive as it spurred an unwelcome fall in the yen, pushing up import prices and undermining consumer confidence.

“As long as exchange rates move stably in a way that reflects economic fundamentals, they shouldn’t be negative for the economy,” he said.

The BoJ launched a surprise expansion of stimulus in October last year to prevent the slump in oil prices, and a subsequent slowdown in inflation, from eroding inflation expectations.

While oil prices have continued to fall, consumption is recovering and inflation expectations have held steady, Kuroda said, justifying the decision to stand pat even as annual core consumer inflation slowed to 0.5% in December.

Many analysts expect the BoJ to ease again this year with some forecasting the next move to come as early as in April, when the bank issues fresh quarterly inflation forecasts.

Central banks across the globe, most recently Indonesia, have deployed monetary stimulus measures as slumping oil costs raised the spectre of deflation.

Kuroda welcomed such policy moves, arguing that while low oil prices might sway inflation short-term, central banks had the power to stabilise prices in the long run.

“I think it’s a commonly shared understanding among central banks that in the medium- to long-term perspective, monetary policy can achieve price stability. I, too, completely side with this view.”