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Bank of Japan's Kuroda says inflation finally close to target
[HONG KONG] Japan's inflation is finally moving close to the Bank of Japan's (BOJ) two per cent target, Governor Haruhiko Kuroda said at Davos on Friday.
"There are some indications that wages are actually rising, and some prices have already started to rise and even medium- to long-term inflation expectations, which have been so weak in the last couple years, are now slightly picking up," Mr Kuroda, speaking in English, said on a panel at the World Economic Forum in the Swiss ski resort.
"So, there are many factors which made achieving two per cent inflation target or price stability target so difficult and time-consuming, but I think we are finally close to the target," he said.
The yen gained after the remark, strengthening 0.8 per cent to 108.58 to the dollar at 10.54am in New York.
After taking the helm in 2013, Mr Kuroda immediately implemented a record program of monetary stimulus aimed at generating inflation. That helped boost stock prices, corporate profits and the expansion of the economy.
However, inflation in Japan remains far from the goal, which he initially aimed to hit in about two years. Japan's core inflation measure, which is what the BOJ targets, rose 0.9 per cent in December.
"While consumer-price inflation is likely to increase to our price stability target of two per cent, the deflationary mindset entrenched among people under prolonged deflation has been more tenacious than expected," Mr Kuroda said. "Therefore the Bank of Japan will continue to support Japan's economy and prices by pursuing powerful monetary easing with persistence."
Mr Kuroda's comments add to a few recent signs that the BOJ is becoming more confident that it's having success in the quest to permanently end deflation.
In a small sign of progress this week, the bank said that inflation expectations had stopped falling. In the statement after deciding to keep monetary policy unchanged, the BOJ said inflation expectations were "more or less unchanged," versus a previous assessment that they were weakening.
However, it also said that risks to prices remain "skewed to the downside" and forecast that CPI would not reach two per cent until around the fiscal year that begins in April 2019.
And a minority of BOJ policy makers are now raising the need for future discussions on normalising policy, though they agree that the stimulus program must continue unchanged for some time, according to people familiar with central bank's discussions.