By Leika Kihara
TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said the central bank could debate conditions for exiting from ultra-easy policy if prospects for achieving its inflation target improve.
But he refrained from dropping hints on the timing or means of ending the BOJ’s stimulus, stressing that doing so now was premature with inflation distant from its 2 percent target.
“When the possibility of achieving our price target heightens, conditions for an exit would fall into place,” Kuroda told a seminar on Thursday.
“The BOJ’s policy board could then discuss conditions for an exit,” he said, giving the strongest signal yet on the chances of beginning a debate over how to end the central bank’s crisis-mode policies.
A summary of the BOJ’s rate review in April showed on Friday the bank was working to prepare markets for a future withdrawal of its stimulus, with some policymakers calling for more scrutiny of the rising cost of prolonged easing.
In a speech delivered at the seminar, Kuroda pointed to risks that could delay achievement of its price target, such as the chance inflation expectations may not increase smoothly.
With the economy in good shape and the labor market tightening, the key to achieving 2 percent inflation was to change public perceptions that prices won’t rise much, he said.
“If there is strong uncertainty about future growth, firms will hesitate to raise wages,” Kuroda said. “We need to keep in mind that it might take a fair amount of time” before actual rises in prices heighten inflation expectations.
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Source: Investing.com