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Economy

BOJ governor again pledges to move inflation needle to 2%

Haruhiko Kuroda about to start 2nd term still well short of his goal

Bank of Japan Gov. Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo on March 9, 2018.   © Reuters

TOKYO -- Bank of Japan Gov. Haruhiko Kuroda again vowed to get prices rising at a 2% pace as he looked ahead to his second term at the helm of the central bank.

"In the five years [since becoming the governor], Japan's economic conditions have improved greatly," Kuroda told a press conference on Friday, after the BOJ decided to keep its monetary policy unchanged.

It was Kuroda's last meeting under his current term.

"But unfortunately, our target of 2% inflation has not been achieved," he continued. "This is why when hearing that the government wanted to reappoint me, I [thought I] should take the offer and try and achieve that inflation target with all my power."

Japan's economy expanded for the eighth consecutive quarter in the three months ended in December, a feat not managed for 28 years. Backed by the strong economic performance, the central bank expects inflation to reach 2% around fiscal 2019.

In a parliamentary hearing on March 2, Kuroda said that were this to happen, "there's no doubt that we will consider and debate an exit [from monetary easing]." His words sent the yen higher and triggered a bond selloff. Kuroda was subsequently forced to clarify his stance, saying, "I have no intention to explore any concrete debate on an exit."

His clarification was understandable given Japan's latest consumer price index, excluding volatile prices of fresh foods, which showed inflation of 0.9% on the year in January, still way off the bank's target.

The reason why inflation has so far failed to budge is because "it is taking time for people to get out of their deflationary mindset," Kuroda said, adding that there are "downside risks" to inflation along the way.

"As we always spell out in our monetary policy statements, the BOJ will make appropriate policy adjustments taking account of developments in economic activity and prices as well as financial conditions, with a view to maintaining the momentum toward achieving the price stability target.

"If the momentum is not kept, then we will of course consider additional monetary easing."

Kuroda is set to begin his second term in April. Pending approval from the Diet, he will become the first governor to be reappointed in 57 years.

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