BOJ loses bark and bite under humbled Kuroda

Fri Oct 28, 2016 3:25am EDT
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By Leika Kihara

TOKYO (Reuters) - As his term winds down, Bank of Japan Governor Haruhiko Kuroda has retreated from both the radical policies and rhetoric of his early tenure, suggesting there will be no further monetary easing except in response to a big external shock.

In a clear departure from his initial "shock and awe" tactics to jolt the nation from its deflationary mindset, he has even taken to flagging what little change lies ahead, trying predictability where surprise has failed.

This new approach will be on show next week, when the BOJ is set to keep policy unchanged despite an expected downgrade in forecasts that could show Kuroda won't hit his perpetually postponed 2 percent inflation target before his five-year term ends in April 2018.

"The days of trying to radically heighten inflation expectations with shock action are over," said a source familiar with the BOJ's thinking. "No more regime change."

Kuroda told parliament last week that while the BOJ might again stretch the timing for its inflation target, he saw no need to ease at the Oct. 31-Nov. 1 policy meeting.

"There may be some modification to our forecast that inflation will hit our 2 percent target during fiscal 2017," he said, the first time he has offered hints on upcoming projections.

Japan's core consumer prices fell for a seventh straight month in September as household spending slumped, data showed on Friday, reinforcing the view it will take some time for inflation to accelerate to its target.

In the past, the market has learned to expect the unexpected.   Continued...

Governor of the Bank of Japan Haruhiko Kuroda attends IMFC plenary during the IMF/World Bank annual meetings in Washington, U.S., October 8, 2016. REUTERS/Yuri Gripas