Greenwood Trading: Haruhiko Kuroda, the Governor of the Bank of Japan has pledged to keep monetary policy on track to meet inflation targets.
Japan – Greenwood Trading has reported that the Governor of the Bank of Japan, Haruhiko Kuroda, has reassured Prime Minster Shinzo Abe that the central bank stands ready to take whatever action is required to achieve its 2% inflation target.
Mr Abe is weighing the potential impact on Japan’s economy if he decides to introduce an additional sales tax increase in 2015 after the last hike undoubtedly contributed to a sharp contraction in gross domestic product in the world’s third largest economy.
“Recent data showed the economy shrank at an annualized rate of 7.1% and Mr. Abe will be mindful of the implications for the economy of a further rise to 10% from the current 8%,” said Simeon Kwanda who heads up economic research at Greenwood Trading.
Mr Kuroda’s pledge came after a meeting with Mr. Abe at which he was not given specific directives on monetary policy. He stated that if the BoJ’s inflation target became “difficult to achieve”, the Bank would adjust policy without hesitation.
Mr. Abe has until the end of the year to make a final decision; one that will ultimately be based on how resilient the economy is in the current quarter following the sharpest contraction since 2009.
“Mr. Abe must balance the need to deliver on campaign promises with answering calls for Japan to address its huge fiscal debt burden which is the largest in the world,” added Kwanda.
Greenwood Trading says it expects additional stimulus from the BoJ but warned that the risky monetary policies risked destroying the yen.
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