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Friday, March 29, 2024

Kuroda says BoJ reviewing policies

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Bank of Japan Gov. Haruhiko Kuroda declined to rule out new initiatives to stoke inflation as the central bank conducts a comprehensive review of its policies and their effectiveness.

Kuroda emphasized in a speech in Tokyo Monday that the review, to be completed by the Sept. 20-21 board meeting, won’t result in any reduction in monetary stimulus, as is “being called for by some market participants.”

“There is ample room for further monetary easing in either of three dimensions”•quantity, quality, and the interest rate”•and other new ideas should not be off the table,” Kuroda said in prepared remarks at a conference. He declined to specify what other options might be considered if needed.

The yen gained after Kuroda’s speech, and was at 103.66 per dollar as of 1:42 p.m. in Tokyo, having weakened to 104.32 on Friday.

“Of course, it’s possible for the BoJ to introduce a fourth easing measure in addition to the existing three because Kuroda continues to say there’s no limit to monetary policy,” Takeshi Minami, chief economist at Norinchukin Research Institute, said after Kuroda’s speech. “But when you look at market reactions, I don’t think they are buying what the BOJ is saying. Markets feel Kuroda is reaching limits.”

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Given this skepticism, Kuroda gave an extended explanation of why the bank may have to take an action even if it entails costs. He said there is “no free lunch” and pointed to “enormous” benefits for Japan in ending deflation.

Kuroda cautioned that some policies couldn’t be enacted legally or shouldn’t be, such as directly underwriting government bonds and monetizing fiscal deficits.

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