Haruhiko Kuroda had his first meeting as the new Governor of the Bank of Japan on last week and there, an unprecedented stimulus was announced. According to Kuroda, that is good enough to reach an inflation goal of 2%. As stated by Kuroda, the Central Bank of Japan has taken all necessary actions and possible measures for reaching the inflation goal. Policy changes will be introduced as required; however, he doesn’t believe that adjustments should be made in every single month.
Incidentally, on next week, a meeting is to be held in Washington among the Group of 20 countries and many feel that Kuroda is trying to head off criticism in the same. He is currently signaling limits to the easing policy which had played a pivotal role in declining Yen against USD to around 18% since last November. Wayne Swan, the Treasurer from Australia is in support of the policies of Japan; other countries such as South Korea and China are kind of concerned by currency weakness and the risk of the capital spillovers. According to the Global Strategist at Societe Generale, Kit Juckes, Kuroda has a lot of task to do if he is looking to avoid the criticism. Juckes added that Kuroda will try to smooth the way with the Group 20 meeting.
On today, Yen has declined by 0.6% against USD and is currently priced at 99.60 per USD. At one point time on today, it touched 99.72 per USD, marking its weakest level since May, 2009. On last week, Kuroda made a pledge to double the monetary base in the next 2 years after he became the Governor of Bank of Japan on March.
The Bank of Japan is currently undergoing a campaign for fuel prices and growth, but, according to Kuroda, it is not targeting the Yen and the country’s monetary policy will not be changed just because of the movements in the currency.
In 4th quarter of 2012, the Gross domestic product of Japan increased at an annualized 0.2%. In any year since 1997, the prices excluding fresh food have not gained 2%. Incidentally, in that year, the sales tax was increased. Kuroda believes that the investors are currently seeking a fresh equilibrium point. On 5th April, yield on the 10-year bond reached 0.315%, a record low figure, after Central Bank’s policy announcement.