BOJ's Kuroda backpedals on yen warning, says weakness not so harmful

Fri Jun 19, 2015 5:19am EDT
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By Leika Kihara and Stanley White

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said the yen's current weakness was not inflicting severe pain on the economy, toning down an earlier warning to markets against pushing the currency too far down.

He also shrugged off the view held by some market players that the central bank could be dissuaded from expandings its monetary stimulus further because of downside to a weak yen, like the pain households feel from rising import prices.

"At present, I don't think yen declines are causing severe damage to Japan's economy," Kuroda told reporters on Friday.

"There's absolutely no truth to the view that the weak yen will deprive monetary policy of flexibility."

The BOJ board voted 8-1 to stick with the current strategy of increasing base money at an annual pace of 80 trillion yen ($650 billion) through aggressive asset purchases.

It also maintained its rosy assessment of the economy, as it continues to recover. It also said housing investment "appears to be picking up", revising up its view from earlier.

Kuroda reiterated that he expects consumer inflation to hit the BOJ's 2 percent target by around September 2016, a timeframe many analysts believe is too optimistic.

"Job and income conditions have steadily improved and will continue to recover," he said, signaling his conviction that Japan can achieve 2 percent inflation without more easing.   Continued...

A Japanese flag flutters atop the Bank of Japan building in Tokyo May 22, 2015. REUTERS/Toru Hanai