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Kuroda still projecting optimism

Bank of Japan Gov. Haruhiko Kuroda at a press conference on Nov.19.

TOKYO -- After the Bank of Japan on Thursday decided to keep its monetary policy unchanged, BOJ Gov. Haruhiko Kuroda put a positive spin on recent developments.

     Speaking to the press after the central bank's policy board concluded its November meeting, Kuroda said the bank "genuinely acknowledged weakness in indicators like the break-even inflation rate and some questionnaires that measure inflation expectations." But he went on to add, "Companies are changing the way they price their products, and households are willing to accept the hike in prices. From a longer-term perspective, inflation expectations appear to be rising on the whole."

     The acknowledgement of weaker indicators follows the bank's decision to push back the time frame for achieving its 2% inflation target. That decision was made during the previous meeting.

     Kuroda also remained bullish on Japan's economy, despite the fact that it has entered a technical recession. "The negative growth in the three months ended in September was mostly down to a decrease in inventory investment," he said. "Final demand is strong. Inventory adjustment is making progress. We are seeing a different picture from the April-June period."

     The governor, however, seemed irritated at the apparent lack of wage growth. "Companies are posting record profits, and Japan is near its structural unemployment rate. In light of these developments, I'd have to say wage growth remains weak," Kuroda said. "I will be keeping a close eye on developments."

     "It's clear that the BOJ's scenario has collapsed," said Yasunari Ueno, chief market economist at Mizuho Securities. "It was clear from the previous meeting, but they didn't act with further easing. They seem to have separated the apparent cracks in their scenario from their action."

     Some in the market believe this is because it's up to Kuroda alone to make the decision on additional easing, rather than the board members. "I still predict the bank to act at some point," Ueno said, "but it's becoming increasingly difficult to predict when."

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