BOJ's Shirai defends latest easing, rules out incremental action

Wed Nov 26, 2014 1:59am EST
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By Leika Kihara

HIROSHIMA, Japan (Reuters) - A Bank of Japan board member who voted for last month's huge monetary expansion defended the move on Wednesday, saying that failing to act would have cast doubt on the bank's determination to hit its price goal and undermined its credibility.

Having deployed "the maximum scale of stimulus possible," the BOJ can now wait to see how much the move will support the economy and prices, Sayuri Shirai said, signaling that no further monetary easing was necessary in the near term.

"We don't ease policy each time (economic and price) growth undershoots our expectations," she told a news conference.

Shirai, one of two academics who held casting votes in last month's close-call decision, said she initially thought about holding off on further boosting the stimulus.

But she eventually decided to support Governor Haruhiko Kuroda's expanded stimulus plan to head off the risk of slowing inflation and demonstrate the BOJ's conviction to achieve its 2 percent inflation target.

"By not acting, the BOJ might risk its credibility. Such a circumstance would not only render my outlook unfeasible but would also undermine the feasibility of the 2 percent target," she told business leaders in Hiroshima, western Japan.

Shirai urged companies to help Japan beat deflation by raising wages and capital expenditure. The BOJ led by example on Tuesday saying it was granting its board a salary increase of 1.3 percent, the first pay raise in nine years.

The BOJ stunned markets by expanding a massive monetary stimulus drive last month as the economy slipped into recession.   Continued...

Bank of Japan Governor Haruhiko Kuroda attends a conference of central bankers hosted by the Bank of France in Paris November 7, 2014.   REUTERS/Charles Platiau