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BoJ's Kuroda Sees Inflation Above 1% In First Half Of 2014

Japan's inflation is set to stay above 1 percent during the first half of next year, Bank of Japan Governor Haruhiko Kuroda said on Wednesday.

Speaking at a Japan Business Federation conference in Tokyo, Kuroda said, "Given that deflation has continued for nearly 15 years, those are important changes."

He hopes to see substantial changes in inflation expectations once people actually experience a rise in prices. "The Bank holds the view that, due to a backward-looking element together with a forward-looking element, inflation expectations will continue on a rising trend, gradually converging to around 2 percent -- the price stability target," he said.

Kuroda asserted that the central bank does not aim to artificially create inflation. The positive developments in the economy and the financial market as well as in people's expectations must be treated as a 'golden opportunity' to overcome deflation, he said.

Japan has been in a 'deflationary equilibrium', when firms and households take decision on the assumption that prices will not increase, the central banker said. "There is a need to change the rules of the game that prevailed in the 'deflationary equilibrium'," Kuroda added.

He said policy authorities need to come up with bold measures that will allow firms to change their mindset and raise prices and wages simultaneously, resulting in a positive impact on the economy.

In April, the Bank of Japan took markets by surprise when it launched an ultra-loose monetary policy, aimed to achieve the 2 percent inflation target in two years.

The central bank is committed to continuing with the quantitative and qualitative easing as long as it is necessary to maintain the 2 percent target in a stable manner, Kuroda stressed. The bank aims to achieve 2 percent inflation as early as possible, he said.

The BoJ chief also reiterated that the bank will examine both upside and downside risks to economic activity and prices, and make appropriate adjustments.

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