Bank of Japan Governor Haruhiko Kuroda said Tuesday that the central bank may consider purchasing longer-dated bonds, reiterating the need for more aggressive monetary easing to reverse 15 years of deflation.
The BOJ will consider purchasing assets with longer maturities in a bid to push down yields across the curve, Kuroda told Parliament. The central bank currently purchases government bonds with maturities of up to three years.
While reiterating the central bank's resolve to achieve 2 percent inflation "at the earliest possible time," he said the asset purchases by BoJ, until now, has not been sufficient.
Though the central bank's purchases of assets so far went beyond the domain of traditional central bank operations, the scale and type of assets to be purchased have not been sufficient to achieve the 2 percent inflation, Kuroda said.
"We need to pursue bold monetary easing both in terms of quantity and quality," he said, adding that facing deflation for nearly 15 years "is an extraordinary situation even on a global scale."
"Given that there is little room for the interest rate to decline, it is imperative to work on market expectations in the conduct of monetary policy," Kuroda said. He also stressed on the importance of greater cooperation with the government.
He said parallel to monetary easing, the government should take initiatives to create real demand and improve wages and employment through the expansion of consumption and investment. This may contribute to generating a virtuous cycle that will eventually lead to price increases, Kuroda observed.
The government should also take measures aimed at achieving fiscal consolidation in the medium to long term, to avoid an increase in interest rates on the back of declining confidence in fiscal management.
Kuroda was appointed as BoJ Governor by the government led by Shinzo Abe, a strong advocate of aggressive monetary easing. Kuroda also shared his view and has vowed to end deflation within two years.
Kuroda, formerly the head of the Asian Development Bank, replaced Masaaki Shirakawa as governor early this month. Shirakawa had reservations about faster monetary easing as he believed releasing more money into the system will not help stem deflation in the long run.
by RTT Staff Writer
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