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BOJ Kuroda Flags Need for Very Gradual Exit in Change of Tack

28 Feb 2018 5:42 am
   By Kosaku Narioka and Megumi Fujikawa 

TOKYO--Bank of Japan Gov. Haruhiko Kuroda broached the subject of policy normalization Wednesday, going further than previous remarks to talk of the need to adjust policy very gradually to avoid harming the economy.

"A central bank should avoid causing any shock to the economy," Mr. Kuroda said during a parliamentary committee session.

He acknowledged that policy normalization would eventually take place, but flagged the experience of the U.S., a likely reference to the taper tantrum of 2013.

"I don't think the bank will continue current powerful monetary easing if the inflation target is achieved and the economy expands steadily," he said, adding that it was not the mission of the central bank to finance government debt.

Mr. Kuroda's comments indicate a greater willingness by the head of Japan's central bank to talk about the BOJ's exit policy, a topic he has so far been reluctant to discuss in public given that inflation still lies far from the bank's 2% target. Mr. Kuroda had repeatedly said that talking about a potential exit from monetary easing could give the wrong impression to the markets and cause unnecessary confusion.

Analysts say communicating with market participants about future policy normalization is likely to be Mr. Kuroda's main challenge in his second five-year term as BOJ governor.

Since the beginning of 2018, the yen has been under upward pressure due partly to speculation over a possible rate increase by the Japanese central bank later this year.

The yen was largely unchanged immediately after the comments. A reduction in one of the bank's bond buying operations earlier Wednesday had already caused another rise in the yen.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

February 28, 2018 00:42 ET (05:42 GMT)

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