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17 Dec 2013
Key headlines from BoJ Kuroda - FT interview
FXstreet.com (Bali) - Bank of Japan (BOJ) Governor Kuroda was interviewed in the Financial Times, and below are the most relevant headlines as observed in the FT.
On Abenomics 3 arrows: “I think I can say we are half way,” he says. “The latest statistics show that the inflation rate has reached 0.9 per cent. But there is still a long way to go. It’s no good just to touch on the 2 per cent and then go down to 1 per cent or less,”
"We envisage basically three channels through which the quantitative and qualitative easing would affect the economy. The first is the massive amount of purchases of Japanese government bonds, which would suppress long-term interest rates over the entire yield curve. The second channel is a ‘portfolio rebalancing effect’. Banks, companies and households would shift their portfolios, now dominated by fixed income assets, towards riskier assets, including lending to the economy. The third channel is shifts in expectations."
"Also, the output gap – a measure of excess capacity – is also falling. The BoJ thinks it might now be only 1-1.5 per cent of potential output. It also expects 1.5 per cent annual growth over the next two fiscal years. At this rate, the output gap would be closed within two years. This rapid growth would occur despite forthcoming increases in the consumption tax. “I think our monetary policy must have contributed to realising positive growth well above potential,”
"There may be some differences of nuance, difference of views, not about the channels through which monetary policy can affect the real economy but the extent. A few of them think that even in two years’ time, even with this QQE, consumer price inflation may not reach 2 per cent”.
"At this stage, we are not thinking about any other policy tools since we are on track."
"Kuroda is in favour of the consumption tax hikes, if the economy slows in response the government and BOJ “can do something to ameliorate the situation” … but if the market loses faith in public finances due to the delay/lack of fiscal consolidation there isn’t much they can do..."
On Abenomics 3 arrows: “I think I can say we are half way,” he says. “The latest statistics show that the inflation rate has reached 0.9 per cent. But there is still a long way to go. It’s no good just to touch on the 2 per cent and then go down to 1 per cent or less,”
"We envisage basically three channels through which the quantitative and qualitative easing would affect the economy. The first is the massive amount of purchases of Japanese government bonds, which would suppress long-term interest rates over the entire yield curve. The second channel is a ‘portfolio rebalancing effect’. Banks, companies and households would shift their portfolios, now dominated by fixed income assets, towards riskier assets, including lending to the economy. The third channel is shifts in expectations."
"Also, the output gap – a measure of excess capacity – is also falling. The BoJ thinks it might now be only 1-1.5 per cent of potential output. It also expects 1.5 per cent annual growth over the next two fiscal years. At this rate, the output gap would be closed within two years. This rapid growth would occur despite forthcoming increases in the consumption tax. “I think our monetary policy must have contributed to realising positive growth well above potential,”
"There may be some differences of nuance, difference of views, not about the channels through which monetary policy can affect the real economy but the extent. A few of them think that even in two years’ time, even with this QQE, consumer price inflation may not reach 2 per cent”.
"At this stage, we are not thinking about any other policy tools since we are on track."
"Kuroda is in favour of the consumption tax hikes, if the economy slows in response the government and BOJ “can do something to ameliorate the situation” … but if the market loses faith in public finances due to the delay/lack of fiscal consolidation there isn’t much they can do..."