Bank of Japan Kuroda Indicated Chance of Delay in Hitting Price Target

Bank of Japan Governor Haruhiko Kuroda stated the central bank may drive back the schedule for hitting its inflation goal of this month’s rate review, given the underlying weakness in price development.

Kuroda did not indicate how such a delay could influence the Bank of Japan policy decision, though he stressed out that the bank’s bond procurements may slow in the future if 10 year bond yields decline well below its goal of approximately zero percent.

Speaking in parliament on Friday, Kuroda said he anticipates Japan’s economic development to quicken next fiscal year from the recent year as on brightening predictions for worldwide development.

But he recommended that the recent weakness in core consumer prices, which indicated the 6th  straight month of annual falls in August, may force the Bank of Japan to reduce its inflation prediction at a quarterly review of its projections at a Oct. 31-Nov. 1 meeting.

“There may be some modification to our forecast that inflation will hit our 2% target during fiscal 2017,” Kuroda stated.

Sources have stated that Bank of Japan will slightly reduce next fiscal year’s inflation prediction in the quarterly review, though the central bank is seen holding off on easing after having just made over its policy framework in September.

The Bank of Japan has repeatedly been forced to drive back the timing for hitting its ambitious 2% inflation goal as falling oil prices and weak consumption influenced on overall prices.

Last month, the central bank substituted its policy goal to interest rates from expanding the monetary base following its massive asset purchases failed to produce sustained inflation.

Under a new “yield curve control” (YCC) framework, the Bank of Japan main means for monetary easing would be to deepen negative interest rates from the current minus 0.1%, or lower its 10-year bond yield target – now set at approximately zero percent.

Kuroda restated that the Bank of Japan may slow the pace of its bond purchases from the recent pace of 80 trillion yen ($769 billion) a year providing it can meet its new yield goal.

“If 10-year government bond yields fall well below our target of around zero percent, we may slow our bond purchases,” Kuroda stated.

“But we don’t see an immediate possibility of our bond buying falling sharply from the current pace,” he added.

Kuroda also said the “BOJ saw no need to set a rigid range on how much 10-year yields could deviate from the target of around zero percent, saying that the target was a loose one for some room for allowances.”

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