No plans to exit monetary easing plan yet: BOJ chief

TOKYO • The Bank of Japan's (BOJ) governor yesterday ruled out pulling the plug on its massive monetary easing plan any time soon.

Mr Haruhiko Kuroda's comments came days after the US Federal Reserve hiked interest rates for the third time since December as the US economy picks up and the European Central Bank is moving towards turning off the stimulus taps.

Japan's central bank has not made a significant move for the past five policy meetings, as the economy enjoys its longest run of expansion in more than a decade.

But the growth trend has been shaky and consumer prices remain way below the BOJ's 2 per cent inflation target, a cornerstone of efforts to beat years of deflation and slow growth. Mr Kuroda insisted the BOJ would leave an 80 trillion yen (S$1 trillion) annual asset-buying scheme unchanged, along with other policy moves aimed at boosting the world's No. 3 economy.

The central bank now expects to reach its inflation target by 2019 - four years later than originally planned - and economists are increasingly doubting if it has the tools to achieve its price promise.

"There is a significant road ahead before we reach the 2 per cent price target," Mr Kuroda told reporters yesterday after its latest meeting. "What is important is that we achieve (that goal) and maintain it. It is not about how long we keep monetary easing in place."

Frustrated at the bank's failure to deliver on its inflation pledge, economists and politicians are starting to question the benefit of sustained monetary easing and are asking the BOJ to explain how it will exit the programme. The bank gobbles up vast amounts of government bonds as part of its vast asset-buying plan.

Analysts said there was little chance of an exit strategy in the near term. "It's not strange that Kuroda isn't talking about an exit plan when inflation's around zero per cent. It's just too early," said Mizuho Bank chief market economist Daisuke Karakama.

"The problem is that some started to wonder if the BOJ is really thinking about exit at all. That's something Kuroda would want to clarify."

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on June 17, 2017, with the headline 'No plans to exit monetary easing plan yet: BOJ chief'. Print Edition | Subscribe