Bank of Japan governor defends his yield curve control policy

Haruhiko Kuroda

Bank of Japan Governor Haruhiko Kuroda defended his yield curve control policy on Monday, saying it had kept Japan’s long-term interest rates from joining the uptrend in global yields and was helping the economy overcome stagnation.

Kuroda also shrugged off criticism made by some academics that his 2 per cent inflation target was too ambitious for a country long mired in deflation, arguing that the BOJ can leave itself enough policy ammunition to fend off future shocks to the economy only by accelerating price growth to its target.

In a speech to the Keidanren business lobby, Kuroda offered an upbeat view on the global economy, saying it was emerging from the doldrums as factory and trade activity picked up.

“The global economy seems to be finally entering a new phase, by putting the negative legacy of the global financial crisis behind it, although considerable uncertainties lie ahead,” he said.

The BOJ’s new policy framework aimed at capping long-term interest rates will help maximise the benefits of such global tailwinds for Japan’s economy, Kuroda said.

“By implementing this policy framework in an appropriate manner, the BOJ can take advantage of the recovery momentum of the global economy to produce an even greater driving force for Japan’s economy,” he said.

Kuroda’s remarks underscore the growing sense of optimism BOJ policymakers share on the outlook for Japan’s economy and reinforce market expectations that the bank will hold off on expanding monetary stimulus in coming months.

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The author Paul