BOJ's Kuroda: monetary onslaught won't cause asset bubbles

Fri Apr 5, 2013 12:36am EDT
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By Leika Kihara and Stanley White

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda played down concerns his unprecedented burst of monetary stimulus would create asset-price bubbles even as it delivered an immediate pay-off in global markets, with government bond yields at a record low, the yen hitting a 3-1/2 year trough and stocks surging to multi-year highs.

The yen weakened past 97 per dollar on Friday for the first time since August 2009, a day after the BOJ vowed to inject about $1.4 trillion into the economy in less than two years in a dose of shock therapy to end two decades of deflation.

The Nikkei share average jumped as much as 4.7 percent, extending Thursday's 2.2 percent rise and breaking through 13,000 points for the first time since August 2008. The 10-year JGB yield fell as much as 12 basis points to a record low of 0.315 percent.

"We will be vigilant of the risk of a bubble. I don't think there's a bond or stock market bubble now and I don't see one emerging any time soon. But we will be vigilant of the risk," Kuroda told the lower house of parliament.

The BOJ's strategy to reach 2 percent inflation within two years was viewed as a radical gamble to revive the economy. It will buy about 7 trillion yen ($73 billion) of bonds per month, equivalent to about 1.4 percent of gross domestic product. By comparison, the U.S. Federal Reserve is buying $85 billion of bonds per month, about 0.6 percent the size of the economy.

The central bank will also increase purchases of exchange-traded funds by 1 trillion yen per year and real-estate trust funds by 30 billion yen per year.

"We think there is a risk of a bubble," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities.

"If these types of asset purchases are going to work, then they work by distorting asset markets."   Continued...

Bank of Japan Governor Haruhiko Kuroda points at a chart projecting his quantitative and qualitative monetary easing plans during a news conference after his first monetary policy meeting as BOJ governor in Tokyo, April 4, 2013. REUTERS/Yuya Shino