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BOJ Kuroda, unfazed by yen falls, signals readiness to ease more
[TOKYO] Bank of Japan Governor Haruhiko Kuroda on Tuesday stressed the bank's readiness to expand stimulus further to meet its price goal, standing firm in the face of criticism that last month's monetary easing has accelerated unwelcome falls in the currency.
But not all in the BOJ's nine-member board share Kuroda's optimism that 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 Kuroda defended the Oct 31 easing as a necessary step to ensure the Japanese public shakes off its "deflationary mindset," and 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 in a pre-emptive move against risks of a slowdown in inflation. 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 moderately.
Advocates of easing said the BOJ must act to prevent recent oil price falls from hurting inflation expectations, and in doing so ought to expand asset purchases at "as massive as scale as possible" to boost sentiment, the minutes showed.
But those opposed to acting now warned that further easing would accelerate unwelcome yen falls and could not be counted on much in lifting business sentiment, given interest rates were already very low, according to the minutes.