BOJ’s Kuroda Maintains Ultra-Easy Policy

Bank of Japan Governor Haruhiko Kuroda emphasized his decision to maintain the country’s central bank’s massive monetary stimulus program, while also offering a positive view on the outlook over the bank’s 2 percent inflation target.

According to Kuroda, the country’s economy will continue growing at a moderate pace, with rising household income leading up spending.

“With the output gap improving and medium- to long term- inflation expectations seen heightening, we expect inflation to accelerate as a trend and head toward 2 percent,” said Kuroda during a quarterly meeting of the BOJ’s regional branch managers.

Kuroda said that the BOJ retain its ultra-loose policy “until needed to stably and sustainably achieve” its target.

The central bank has revised up the assessment for two of the country’s nine regions in a report. In addition, it maintained its upbeat view for six other areas. It said that the tightening job market was supporting consumption.

As a sign of its confidence on the strengthening economy, the central bank described the economy as “expanding” or “expanding moderately” for six regions.

Meanwhile, a senator said to parliament on Thursday that there exist good signs that the economy would lend a hand to the bank and help it meet its inflation target and elusive price goal.

“Medium- and long-term inflation expectations are recently emerging from weaknesses, while wages and inflation are rising moderately,” said BOJ Executive Director Eiji Maeda.

However, the report from the central bank also cited some companies that complained of labor shortages hurting their businesses.

“We have a severe shortage of experienced production line workers,” said a steelmaker in Hokkaido, located at the northernmost part of Japan.

“Our pay is relatively high and yet, we’re seeing people quit for other jobs,” said another construction business in the area.

Japan’s economy grew at an annualized 1.6 percent in the October-December quarter, marking their eighth straight quarter of growth thanks to robust worldwide demand and capital spending.

On the other hand, core consumer inflation steadied at 1.0 percent in February. That was well below the central bank’s 2 percent target. Slow wage growth hinders consumers from boosting spending.

New Budget-Balancing Goal around 2020 – Sources

The Japanese governments is looking into the setting up of new balanced budget goals for the mid-part of 2020 after it pushed back the original plan, according to sources familiar with the matter.

A final decision has not been made yet. This is because of the disagreements over the amount of social welfare that needs to be curbed. There were also concerns about spending cuts that could impede the country’s economy, according to the sources.

The government will come up with a new deadline in June for balancing the primary budget, which includes debt servicing and new bond sales. The timeframe is sometime between fiscal 2023 and 2026.

“We should aim for a budget surplus in the mid-2020s,” said a private-sector adviser on the government’s top economic council.

“We are arranging to make it happen somewhere between the fiscal year 2023 and 2026,”said another senior government source.

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