BOJ chief Kuroda meets PM Abe for policy review briefing

Haruhiko Kuroda, governor of the Bank of Japan, attends a meeting hosted by Kyodo News in Tokyo, Japan on Sept 5, 2016.
Haruhiko Kuroda, governor of the Bank of Japan, attends a meeting hosted by Kyodo News in Tokyo, Japan on Sept 5, 2016. PHOTO: BLOOMBERG

TOKYO (REUTERS) - Bank of Japan Governor Haruhiko Kuroda met Prime Minister Shinzo Abe on Friday (Sept 9) to exchange views on the central bank's comprehensive review of monetary policy due later this month, but Kuroda declined to reveal details of their discussion.

Mr Kuroda said the two did not discuss buying foreign currency bonds, an idea supported by one of Mr Abe's advisors. "There was no special instruction from the premier. We exchanged various views based on recent developments including Asian economies," Mr Kuroda told reporters after meeting Mr Abe at the prime minister's office.

Mr Kuroda has met with Mr Abe regularly to discuss the economy since taking the BOJ top job in early 2013, but Friday's meeting took place at a time of growing doubt about what the BOJ can achieve from a review of its bold quantitative easing campaign.

Mr Kuroda and Deputy Governor Hiroshi Nakaso have said the review will examine ways for the BOJ to reach its 2 per cent price growth target more quickly, an ambition that has so far proved unachievable.

On top of that, some analysts fret that the BOJ's negative interest rate policy and massive government debt purchases are doing the economy more harm than good.

Under its current framework combining negative rates with hefty buying of government bonds and some riskier assets, the BOJ has gobbled up a third of Japan's bond market and attracted criticism from banks for squeezing already thin profit margins.

Sources have told Reuters the BOJ will consider modifying its policy framework and debate some of the unintended consequences of its ultra-loose policy at the rate review Sept 20-21.

In a speech earlier this week, Mr Kuroda publicly acknowledged for the first time that negative rates could dampen public sentiment by hurting banks' profits and the rate of returns on pension investments.

This has led some investors to speculate that the BOJ has few viable policy options left to encourage growth and dispel the deflationary expectations that deter household spending.