Kuroda stays the course, helping Abe towards record-beating run

Tokyo

BANK of Japan (BOJ) governor Haruhiko Kuroda is pushing forward with massive monetary stimulus, set to drive the Abenomics era well into 2019 just as its architect prepares to extend his premiership.

A day before Shinzo Abe readies for victory in a party vote that could make him Japan's longest-serving prime minister, the central bank on Wednesday kept its monetary policy unchanged and reaffirmed its commitment to reaching 2 per cent inflation.

Mr Abe's re-election will ultimately serve as an endorsement of his mix of monetary easing, regulatory reform and fiscal flexibility.

"Mr Abe and Mr Kuroda have been a team during the unprecedented expansion of Japan's financial policy," said Martin Schulz, an economist at Tokyo's Fujitsu Research Institute. "They need to become almost identical twins when policy needs to tighten."

As huge as the BOJ's monetary programme is, most economists surveyed by Bloomberg see "stealth tapering" already underway. And Mr Kuroda and Mr Abe have both said they want policy normalisation eventually.

Wednesday's board meeting reaffirmed policy adjustments in July that were aimed at making the BOJ's stimulus more sustainable in the meantime.

As predicted by BOJ watchers, the central bank again maintained its 10-year bond yield target, asset purchases and guidance on interest rates.

The decision leaves the BOJ even further behind its global peers, who are moving more decisively toward pre-crisis monetary policy. The Federal Reserve is expected to raise interest rates again next week, and the European Central Bank said it planned to phase out its bond-buying by the end of the year.

Mr Kuroda said during a news conference on Wednesday that it was too soon to assess the impact of the recent changes, but that bond market functioning had improved.

"Whether it's monetary easing or tightening, no one wants to continue it forever," he added. BLOOMBERG