Bank of Japan Governor Haruhiko Kuroda said the BOJ’s board does not need to see all the economic indicators in order to decide whether the path toward stable 2% inflation is threatened and requires more monetary easing.
He also told the Asahi Shimbun newspaper in an interview published on Saturday that it would be misleading to show the BOJ’s estimate for the level of the monetary base, the key policy target, for the end of 2015 because the bank is trying to achieve 2% inflation toward fiscal 2015.
The governor repeated that the BOJ will continue its aggressive monetary easing launched last April until the annual inflation rate is well anchored around 2%.
Kuroda said he still believes that the expected drag from the April sales tax hike on consumer spending will be temporary because the government is providing more fiscal stimulus and the tax increase is aimed at better funding social security needs.
Asked how the BOJ would respond to a heightened downside risk, he repeated his recent remarks, saying, “At every monetary policy meeting, we examine the economic conditions and if we foresee a situation where the path toward 2% inflation could become shaky or difficult to achieve, we will make policy adjustments without hesitation.”
“I don’t think we need to wait until we get all the data. There are various data released every week. We look at them and discuss how things will develop at the policy meetings and make any necessary adjustments.”
Last month BOJ board member Yoshihisa Morimoto told reporters that the board may decide whether the economy needs further easing before waiting to see all the data for the April-June quarter, when demand is expected to slump after the tax hike.
On the BOJ’s target of achieving stable 2% inflation in “about two years” from April 2013, Kuroda said it may come “earlier or later than two years.”
Asked if the BOJ will publish its estimate for the amount of the monetary base at the end of 2015, he said, “It (the timing of achieving 2% inflation) will be from around the end of fiscal 2014 toward fiscal 2015, so it would be misleading to show it (the BOJ’s estimate for the base money) for the end of 2015 or fiscal 2015.”
“The point is that the current easing will not end in two years (from April 2013) but will continue until the time when 2% (inflation) is maintained in a stable manner. We will continue until the target is achieved and we won’t terminate it by setting a cut-off point.”
Kuroda has told reporters that the current easing is “open-ended,” indicating the BOJ will continue to buy JGBs at the same rate in 2015. He believes Japan can hit the 2% inflation target sometime between late fiscal 2014 (to March 2015) and early fiscal 2015.
The aggressive easing comprises doubling the monetary base to Y270 trillion and the BOJ’s net JGB holdings to Y190 trillion by the end of calendar 2014 (the two-year period here is slightly different from the bank’s timeframe for achieving 2% inflation by the first half of fiscal 2015).
If the BOJ continues easing at the same pace in 2015, the monetary base (money in circulation and deposited by commercial banks at the BOJ) will rise to about Y340 trillion at the end of that year. It will add more stimulus to the economy but BOJ officials have not said whether that would be considered additional easing.