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BOJ's Kuroda says fresh stimulus jolt shows resolve to meet price goal
[TOKYO] Bank of Japan Governor Haruhiko Kuroda, who last week stunned global financial markets by expanding a massive monetary stimulus programme, said the central bank is determined to do whatever it takes to hit its 2 per cent inflation in two years.
Kuroda also stressed the BOJ stands ready to ease monetary policy again should risks threaten achievement of its price target. "There's no change to our policy of trying to achieve 2 per cent inflation at the earliest date possible, with a roughly two-year time horizon in mind," the central bank chief said in a speech at a seminar on Wednesday.
The BOJ shocked global financial markets last week by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected after a sales tax hike in April.
Kuroda said while inflation expectations have been rising as a trend, the BOJ decided to ease to pre-empt risks that slumping oil prices will slow consumer inflation and delay progress in shaking off the public's deflationary mind-set. "In order to completely overcome the chronic disease of deflation, you need to take all your medicine. Half-baked medical treatment will only worsen the symptoms," he said.
Kuroda repeated the BOJ's projection that Japan will likely hit the bank's price target sometime in the next fiscal year beginning in April 2015, supported by expanded quantitative and qualitative easing (QQE) programme.
While he stressed that Japan's economy continued to recover moderately, Kuroda said falling commodity prices could be risks to the outlook if they reflected weakness in global growth.
In deploying QQE last April, the BOJ pledged to double base money via aggressive asset purchases to achieve its 2 per cent inflation target in roughly two years. But many analysts still doubt whether inflation will accelerate so quickly in a country that had been mired in deflation for nearly two decades.
The Japanese economy was hit hard in the second quarter, suffering its biggest slump since the global financial crisis after an April sales tax hike dented consumption.