Kuroda says yen's slump isn't crimping BOJ's policy flexibility

[TOKYO] The slump in the yen isn't reducing the Bank of Japan's policy flexibility, Governor Haruhiko Kuroda said after the BOJ maintained its record monetary stimulus.

After triggering the steepest rally in the currency this year on June 10, Kuroda told reporters at a briefing on Friday that he couldn't say whether a much stronger or weaker yen would be good for Japan.

He reaffirmed that inflation remains on track to meet the central bank's 2 per cent target around the first half of next fiscal year, even after the BOJ's favored gauge dropped to zero in April. Analysts cite sluggish export growth as an emerging risk to a recovery in the economy, along with the buildup of stocks in warehouses.

"So far a weakening of the yen won't be an obstacle to the flexibility of monetary policy," Mr Kuroda said. "Monetary policy is only targeting price stability."

The yen declined 0.1 per cent to 123.13 per dollar at 5:41 pm in Tokyo, after touching a 13-year low earlier this month.

The central bank will continue to expand the monetary base at an annual pace of 80 trillion yen (US$650 billion), it said in its statement Friday, as forecast by all 35 economists surveyed by Bloomberg.

"It's not time for the BOJ to add stimulus," said Masayuki Kichikawa, an economist at Bank of America Corp. "Data on consumer spending have been mixed and exports aren't that strong, but overall the BOJ can maintain its view for a recovery."

The BOJ said it will increase the frequency of its economic outlook reports and release assessments of each board member, starting in January. It will cut the number of policy meetings from 14 a year to eight, in line with the US Federal Reserve.

The outlook reports will be made quarterly and include the forecasts and risk assessments of each board member, the BOJ said. The BOJ will also release a summary of opinions presented at each meeting, a week after the event.

Economic growth is forecast to slow to 1.4 per cent this quarter after a 3.9 per cent annualised expansion in the first three months of the year, when companies increased investment and piled up inventory.

Stronger-than-originally estimated capital spending in the first quarter is likely to be encouraging for Kuroda, who has urged companies to put more of their cash and record profits into new facilities, according to Taro Saito, an economist at NLI Research Institute.

While the tumble in oil prices has pushed down inflation, there are signs of inflationary pressures. Base pay rose 0.4 per cent in April, a second straight increase.

Prices of 321 goods rose in April, compared with 177 in March 2013 before Mr Kuroda began the record stimulus.

BLOOMBERG