TOKYO -- The newest member of the Bank of Japan's policy board said Thursday that he and Gov. Haruhiko Kuroda can probably agree on many points.
While Yutaka Harada believes the central bank can hold off on additional monetary easing at this point, a rise in deflationary sentiment would make fresh stimulus necessary, he told reporters.
Harada's remarks suggest his thinking is largely in line with the BOJ's official position.
Harada replaced Ryuzo Miyao, who supported the BOJ's surprise expansion of its asset-buying program last October in a narrow 5-4 policy board vote. Given the apparent divisions on the board, BOJ watchers had been searching for signs of where Harada stands. At Thursday's news conference, he called the Oct. 31 increase in quantitative easing firepower "a sound decision."
Harada, whose career began in the 1970s at the old Economic Planning Agency, will begin weighing in on BOJ decisions himself at the policy board's two-day meeting next month. Many expect him to side with Kuroda.
But Harada showed some wiggle room on the timespan for reaching the BOJ's target of 2% inflation, which the bank has described as "about two years" since 2013. Far from it, inflation may turn negative this spring. That would "not constitute a major problem if the reason were low crude oil prices," Harada argued. Achieving equal precision in the rate and timing of inflation is no easy task, he said.
Harada thus avoided saying exactly when he thinks price growth will hit the mark. He may find himself straying from the BOJ's albeit fuzzy official line, described as a period centering on fiscal 2015.
The BOJ has seen the monetary policy landscape shift subtly this year, and not just because of oil. Monetary easing is looking like a competitive sport, with the European Central Bank now playing an aggressive game. The yen has strengthened against the euro and other currencies, sapping the upward momentum in Japanese import prices. Inflation expectations remain vulnerable. Many at the BOJ say price trends need to be monitored carefully.
Meanwhile, a rift seems to be opening up between the government and the central bank on the time frame for reaching 2%. In January, the government removed the phrase "at the earliest possible time," which it had stuck with for two years, from its monthly economic report. It worries that the current weakness of inflation may prompt the BOJ to rush out fresh monetary stimulus, weakening the yen and negating the economic benefits of cheaper crude.
Like-mindedness between Harada and Kuroda may ensure continuity in BOJ policy. But with so many factors to consider, making a decision on additional easing isn't likely to get any easier.