Friday, October 18, 2013
DJ: Kuroda Says Efforts To End Deflation Bearing Fruit
TOKYO--Bank of Japan Gov. Haruhiko Kuroda said Friday that the central bank's efforts to eradicate deflation are clearly bearing fruit, citing "progress" in the reversal of the yen's strength and a sharp rise in Tokyo stocks so far this year.
"The effects of that policy are clearly showing up ... and we see more positive signs in the financial markets and real economic and price conditions," Mr. Kuroda said in a speech to a conference of Japanese credit unions specializing in services for small, local companies.
"First of all, looking at the financial markets, we can see that stock prices have risen roughly 40% from the start of the year and there has been progress in the correction of the yen's strength."
Mr. Kuroda's remarks come as speculation lingers that the BOJ views stock prices and exchange rates as critical and, if stocks drop sharply or the yen makes a major rebound, the bank could come under pressure to act to arrest such moves. The gain in Tokyo share prices has helped ignite Japan's long-sluggish consumer spending, which led to strong overall growth in the first half of the year, while the yen's decline has boosted Japanese exports and brightened the mood among Japanese companies.
More than six months since the BOJ introduced monetary easing on an unprecedented scale, central bank officials appear confident that the policy shift has worked to rejuvenate the nation's economy, boosting the odds of hitting the bank's 2% inflation target in about one and a half years from now.
After falling for years amid sluggish demand, Japan's consumer price index has started rising in recent months in a sign of receding deflationary pressure, while business sentiment and investment are recovering on improving exports.
But the market remains skeptical of the bank's price outlook. In the most recent monthly survey of 41 economists by the Japan Center for Economic Research, known as the ESP forecast, only one said the BOJ can achieve that goal by March or April 2015.
There are doubts the BOJ can easily change the deflationary mindset of Japanese or that the government will quickly carry out drastic reforms to remove structural impediments to growth, said Toshihiro Nagahama, chief economist at the Dai-Ichi Life Research Institute.