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4 Apr 2013
Kuroda: BoJ actions aimed at reaching 2% inflation target in 2 years
FXstreet.com (Barcelona) - Bank of Japan Governor Haruhiko Kuroda surprised the markets during his first monetary policy meeting by introducing radical changes such as the decision to double the central bank’s monetary base through JGBs and ETFs in 2 years or to alter the target for money-market operations.
At the press conference following the announcement of the monetary policy decision the BoJ chief said that the actions were aimed at reaching the new 2% inflation target in two years time, as "the previous approach of incremental easing wasn't enough to pull Japan out of deflation.”
The BoJ Governor expressed little concern over the side effects of the announced measures: "I am not worried about a spike in long-term yields or an asset price bubble. The chance of this happening is actually very small.”
He does not expect JGB buys to distort the market: “What we're doing is expanding our purchases to encompass all zones of the yield curve, and I don't expect we'll have any difficulty doing this. When it's time to exit our policy, we will be holding a lot of JGBs, but I don't expect this to immediately lead to portfolio losses.”
Raymond Van Der Putten from BNP Paribas is more doubtful about the outcome of the new policy: “The massive bond purchases could lead to the building up of speculative bubbles in the market. Moreover, consumer prices (excluding fresh food) have never risen by more than 2% per annum since 1997, when the VAT rate was raised. In addition, the BoJ policy could make the government more complacent concerning budget consolidation.”
At the press conference following the announcement of the monetary policy decision the BoJ chief said that the actions were aimed at reaching the new 2% inflation target in two years time, as "the previous approach of incremental easing wasn't enough to pull Japan out of deflation.”
The BoJ Governor expressed little concern over the side effects of the announced measures: "I am not worried about a spike in long-term yields or an asset price bubble. The chance of this happening is actually very small.”
He does not expect JGB buys to distort the market: “What we're doing is expanding our purchases to encompass all zones of the yield curve, and I don't expect we'll have any difficulty doing this. When it's time to exit our policy, we will be holding a lot of JGBs, but I don't expect this to immediately lead to portfolio losses.”
Raymond Van Der Putten from BNP Paribas is more doubtful about the outcome of the new policy: “The massive bond purchases could lead to the building up of speculative bubbles in the market. Moreover, consumer prices (excluding fresh food) have never risen by more than 2% per annum since 1997, when the VAT rate was raised. In addition, the BoJ policy could make the government more complacent concerning budget consolidation.”