Kuroda says BoJ discussing future exit options


TOKYO • The Bank of Japan (BoJ) is talking about how to eventually exit from its massive monetary stimulus programme, but it’s still too early to reveal details, governor Haruhiko Kuroda told Parliament yesterday.

“Internally, we’re conducting various discussions” at the staff level, Kuroda said in response to a question from a lawmaker. How the BoJ normalises policy will depend on what’s happening with prices, the economy and markets at that time, he added.

Providing detai ls now would be inappropriate, confusing and premature, Kuroda said. In the same session, he repeatedly said inflation is far from the 2% target and that the BoJ will continue with stimulus until it achieves the goal.

As the central bank’s global peers look to normalise policy and Kuroda’s campaign to boost inflation stretches into its sixth year, there is increasing focus on the sustainability of the BoJ stimulus and when it might further taper asset purchases and raise interest rates.

While the BoJ is adamant that the exit isn’t near, Kuroda no longer dodges the subject and his comments pave the way for a policy change in the longer term.

The yen strengthened on his comments in Parliament, before retracing most of the move.

“The BoJ is commenting on exit more frequently now,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. Kodama, who doesn’t expect inflation will pick up to the target, said it’s premature to interpret the comments as indicating an exit anytime soon.

“The BoJ is shifting its stance to value its communication with markets. This is part of the shift,” Kodama said.

Yesterday’s comments add to remarks last month when Kuroda said the policy board would be considering and debating an exit from its stimulus policies in the fiscal year starting April 2019, as that was when the BoJ expected to hit the inflation target. That was the first time he’d mentioned an date, though he later made clear that thinking exit and acting on it were different things.

Responding to a lawmaker who suggested there was a risk that the government could pressure the BoJ into continuing stimulus, Kuroda said politics wouldn’t prevent the central bank from taking appropriate policy steps.

Hiroaki Muto, chief economist at Tokai Tokyo Research Centre, said some investors seem to be speculating that the BoJ could move toward the exit while the government is weakened by a cronyism scandal.

“In reality the yen is strong, so I don’t think it’s possible for the BoJ to conduct an exit,” said Muto yesterday.

He added that US President Donald Trump would probably “continue something resembling a trade war” until the mid-term elections, making it a bad environment to head toward the exit.