Bank of Japan Governor Haruhiko Kuroda said the domestic economy will overcome a slump caused by the April sales tax hike and start growing again in the July-September quarter.
Kuroda said in an interview with the Nikkei published on Saturday that the economy will stay on the BOJ’s baseline recovery track, repeating that the drop in demand after the tax was raised to 8% from 5% has been as expected.
He also urged the government to implement its growth strategy with “a sense of urgency” after it updates it in June. The government, the BOJ and the private sector all need to wrestle with shortages of labor and fixed capital by boosting Japan’s productive capacity, he said.
The BOJ’s qualitative and quantitative monetary easing launched in April 2013 “has produced intended results,” such as pushing down bond yields across the curve, increasing portfolio rebalancing and changing public expectations for prices, he said.
But he added: “We would make an adjustment – whether it is an additional easing of credit or some other measure – without hesitation” should prices deviate from the BOJ’s intended path.
The governor did not elaborate on what tools the bank might use. He simply said there are “various possibilities.”
There is speculation in financial markets that the BOJ may conduct additional easing in July, when the BOJ board will review its medium-term growth and inflation outlook.