DAVOS, Switzerland (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Saturday he would scrutinize various factors, including the effect of global market turbulence on Japan’s inflation expectations, in deciding whether additional monetary easing was necessary.
“Japan’s underlying price trend isn’t deteriorating. But some indicators on inflation expectations have been somewhat weak,” Kuroda told reporters at the World Economic Forum in Davos, adding that he would carefully watch how recent global market turbulence affects Japan’s economy and prices.
“We won’t hesitate adjusting policy, including easing policy, if necessary to achieve our 2 percent price target,” he said. Kuroda, however, did not comment on whether the BOJ would ease policy at next week’s rate review.
In a panel session he attended before speaking to reporters, Kuroda said there was no limitation to the BOJ’s policy tools if it were to expand monetary stimulus.
“I don’t think there is any technical limitation to further strengthen our quantitative and qualitative easing (program) if necessary to achieve our 2 pct target,” he said.
Markets are simmering with speculation the BOJ may expand stimulus next week, as the effect of slumping oil prices will likely force it to cut its inflation forecast for the coming fiscal year below 1 percent, sources told Reuters.
Asked by reporters whether he felt additional monetary easing was necessary at this stage, Kuroda said: “We’re looking at various data ... and analyzing them. I can’t say anything more, such as whether we would do anything (next week) or not.”
Kuroda said that while falling oil prices were generally positive for the global economy, the pain they inflict on emerging economies warranted attention.
“When markets are moving this sharply, they could affect emerging markets and resources-exporting economies. That’s a risk to the outlook,” he said.
Additional reporting by Leika Kihara in Tokyo, editing by Larry King and Alexander Smith