BOJ’s Kuroda offers upbeat view on prices, keeps pledge on easy policy

By Leika Kihara

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda on Thursday stressed his resolve to maintain the central bank’s massive stimulus program, even as he offered an optimistic view on prospects for meeting his 2 percent inflation target.

Kuroda said Japan’s economy will continue expanding moderately as rising household income drives up spending.

“With the output gap improving and medium- to long-term inflation expectations seen heightening, we expect inflation to accelerate as a trend and head toward 2 percent,” Kuroda told a quarterly meeting of the BOJ’s regional branch managers.

The BOJ will maintain its ultra-loose policy “until needed to stably and sustainably achieve” its target, Kuroda said.

The central bank revised up its assessment for two of Japan’s nine regions in a report and maintained its rosy view for six areas, saying a tightening job market was supporting consumption.

It described the economy as “expanding” or “expanding moderately” for six of the regions in a sign of its confidence over the strengthening recovery.

A senior BOJ official also told parliament on Thursday that there were promising signs in the economy that would help the bank meet its elusive price goal.

“Medium- and long-term inflation expectations are recently emerging from weaknesses, while wages and inflation are rising moderately,” said BOJ Executive Director Eiji Maeda.

But the central bank report cited some companies complaining that labor shortages were hurting their businesses.

“We have a severe shortage of experienced production line workers,” a steelmaker in Hokkaido, northernmost Japan, was quoted as saying. “Our pay is relatively high and yet, we’re seeing people quit for other jobs,” said a construction firm in the region.

Japan’s economy expanded an annualized 1.6 percent in the October-December quarter, marking the eighth straight quarter of growth, on robust global demand and capital spending.

But core consumer inflation stood at 1.0 percent in February, well below the BOJ’s 2 percent target, as slow wage growth keeps consumers from boosting spending.

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