Kuroda Says Bank of Japan Can Still Achieve Inflation Target 

• BOJ stands ready to adjust record stimulus if needed
• Central bank has “many options” for its monetary policy

The Bank of Japan can achieve its 2 percent inflation target with the current level of monetary stimulus, even as it stands ready to adjust policy if needed, said Governor Haruhiko Kuroda.

Kuroda said he’s watching risks from volatility in global financial markets and that the central bank has “many options” should it need to increase easing.

“At this stage, we have no concrete proposal for further accommodation,” Kuroda said at a Japan Society event in New York. “But if necessary, we will certainly make necessary adjustment.”

Tumbling stocks and commodities prices and a surging yen in the wake of China’s currency devaluation risk hurting sentiment in Japan and increasing deflationary pressure. Consumers are ratcheting down their expectations for price gains.

Data due Friday are forecast to show the BOJ’s main inflation gauge dropping below zero for the first time since Kuroda ramped up monetary stimulus in April 2013.

“Risks are clearly ballooning for the BOJ,” Yasuhide Yajima, an economist at NLI Research Institute in Tokyo, said before Kuroda’s remarks on Wednesday evening local time in New York. While the BOJ may bide its time, it is getting closer to the point for additional stimulus.

China Growth

The economy is facing stiff headwinds, with consumer sentiment falling to a six-month low and exports slowing in July and industrial production dropping in three of the five months to June as manufacturers were burdened with the most inventory since 2009.

Kuroda said the weakness in exports and output would pass. Leading indicators point to a pick up in business investment, Japan’s labor market is tight and a positive feedback loop between wage increases and inflation is in place, he said.

China — Japan’s biggest trading partner — will achieve economic growth of 6 percent to 7 percent this year and next, Kuroda said. Some people in the market are too pessimistic about China’s economy, he said. China’s move to bring market forces to bear on its currency is good for the world economy, he said.

Only one economist in a survey by Bloomberg from July 27 to Aug. 3 said inflation would reach the BOJ’s 2 percent target around the six-month period through September next year, a time frame Kuroda reaffirmed earlier this month. Twelve of the 37 of respondents predicted the BOJ will expand easing on Oct. 30.

The BOJ’s main inflation gauge, which strips out fresh food, is forecast to decline 0.2 percent in July from a year earlier, the first drop since April 2013 when Kuroda introduced his record asset purchase plan.

Source: Bloomberg – Kuroda Says Bank of Japan Can Still Achieve Inflation Target

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