“Haruhiko Kuroda said that the Bank of Japan (8301) will do whatever is needed to end 15 years of deflation should he be confirmed as governor and indicated that open-ended asset purchases could start sooner than next year.
“I would like to make my stance clear that we will do whatever we can do,” Kuroda, president of the Asian Development Bank, said at a confirmation hearing in the parliament in Tokyo today. The central bank hasn’t bought enough assets and should consider buying large amounts of longer-term bonds, he said.
Prime Minister Shinzo Abe’s nomination of Kuroda has spurred forecasts for more aggressive easing after Masaaki Shirakawa exits the job on March 19, with the yield on 5-year government bonds hitting a record low today. The opposition Democratic Party of Japan, the largest party in the upper house, has signaled it will back Kuroda, easing his passage through a split Parliament.
Kuroda will need “to show that he’s radical at the central bank’s two meetings in April, otherwise markets will be very disappointed,” said Masamichi Adachi, senior economist at JPMorgan Securities Asia in Tokyo and a former BOJ official. He must convince policy board members “to change their mindset by 180 degrees,” Adachi said.
The “scale and scope” of the assets purchased by the central bank so far are not enough to achieve a 2 percent inflation target, Kuroda said. The central bank currently buys government debt maturing up to three years, as well as exchange- traded funds and other risk assets.
Kuroda said he would consider bringing forward open-ended purchases, due to start next year.
Stocks, Yen
The Nikkei 225 Stock Average (NKY) pared gains and the yen strengthened after Kuroda said that the BOJ should refrain from directly underwriting government debt — highlighting the potential for even expanded action by the central bank to disappoint some investors.
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