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BOJ chief denies end to ultra-easy money policy will cause market confusion: interview

BOJ Gov. Haruhiko Kuroda (Mainichi)

Bank of Japan (BOJ) Gov. Haruhiko Kuroda has categorically denied that an end of the central bank's prolonged ultra-easy money policy will cause confusion to Japan's economy and the financial system, in an interview with the Mainichi Shimbun.

However, the central bank chief stopped short of clarifying specific measures to prevent such confusion.

"We can prevent the economy and the financial system from being adversely affected through the implementation of appropriate measures," Kuroda said.

The BOJ has continued its quantitative easing policy in which the central bank purchases massive amounts of government bonds from banks and other institutions, thereby supplying a huge amount of money, with the aim of achieving its goal of a 2 percent annual inflation rate.

Currently, the BOJ holds approximately 40 percent of outstanding government bonds. It is feared that when the central bank scales down its ultra-easy money policy, it will cause the market prices of government bonds to plummet and interest rates to sharply rise, causing confusion to financial markets as well as to the country's economy.

"The BOJ has preventive measures in mind, and I'm confident that there'll be no problem," Kuroda said as he dismissed such fears.

However, the central bank chief declined to specify the measures or to clarify how far the BOJ's fiscal situation will worsen as a result of a sharp plunge in the prices of the government bonds it holds. "If I specified precise figures, it could cause misunderstanding," he said.

It is almost impossible for the BOJ to achieve an annual inflation rate of 2 percent before Kuroda's term as BOJ governor ends in April 2018.

He attributed the failure to achieve the inflation target largely to a sharp decline in crude oil prices since summer 2014.

"Our commitment to achieving the goal as early as possible remains unchanged," Kuroda stressed, suggesting that the central bank will maintain its goal.

Kuroda also dismissed observations growing in financial markets that the BOJ's credit relaxation policy has reached its limit.

"If the economy and consumer price momentum can't be maintained, we'll naturally consider a further relaxation in the credit policy," he said.

The central bank head expressed hope that its scenario of taking advantage of improvements in wage and employment situations to raise the annual inflation rate toward 2 percent will materialize.

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