BoJ’s Kuroda upbeat on economy, blames yen’s fall on strong dollar
February 23 2020 01:29 AM
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Kuroda: Dismissing views held by some market players that the yen could be losing its status as a sa
Kuroda: Dismissing views held by some market players that the yen could be losing its status as a safe-haven currency.

Reuters/ Riyadh

Bank of Japan governor Haruhiko Kuroda said yesterday the yen’s recent declines were largely driven by a strong dollar, shrugging off some market views that the widening coronavirus epidemic is triggering an outflow of funds from Asia.
Kuroda also said he had not changed his view that Japan’s economy would continue to recover moderately, suggesting that he saw no immediate need for the BoJ to expand stimulus.
“If needed, we will take additional monetary easing steps without hesitation,” he told reporters upon arriving at a Group of 20 finance leaders’ gathering in Riyadh.
“But the situation is still uncertain.
I don’t think our scenario projecting a moderate economic recovery has been derailed.”
The fallout from the coronavirus crisis has overshadowed the meeting of the world’s top economies kicking off yesterday.
Business disruptions in China are starting to spill over into the global economy, with parts shortages rippling through supply chains as far away as the United States. The yen bounced back on Friday after suffering its worst two-day performance since 2017 on worries about the health of Japan’s economy, which has been hit by supply-chain disruptions and a plunge in Chinese tourists caused by the virus outbreak.
Kuroda dismissed views held by some market players that the yen could be losing its status as a safe-haven currency. “When you look at recent developments, the dollar is strengthening against the yen, the euro and various currencies including those in Asia,” Kuroda said.
“It’s true there is uncertainty over the coronavirus outbreak’s impact on the Chinese, Asian and global economies.
But I don’t think there has been a fundamental change in the exchange-rate market.”
Japan’s economy shrank at its fastest pace in nearly six years in the December quarter, as soft global demand for Japanese cars and machinery and last year’s sales tax hike hurt domestic consumption and business spending.
Some analysts expect the economy to contract again in the current quarter, dashing the BoJ’s hope that an expected rebound in global growth in the middle of the year will underpin Japan’s fragile recovery.
Kuroda brushed aside voices of pessimism, saying that corporate capital expenditure remained firm and rising household income was underpinning domestic consumption of an array of goods and services.
Temporary factors that led to the October-December economic contraction, such as damage from a string of typhoons and the sales tax hike, will fade later this year, he said.
While the coronavirus outbreak was a fresh risk, other uncertainties that dragged on growth like the Sino-US trade tensions and Brexit were subsiding, Kuroda added.
“I don’t expect Japan’s economy to suffer a severe downturn,” he said. Under a policy dubbed yield curve control, the BoJ caps long-term borrowing costs around zero to spur growth and achieve its elusive 2% inflation target. Many BoJ policymakers are wary of ramping up stimulus unless the economy is hit by a severe shock due to their dwindling ammunition and the rising cost of prolonged easing such as the hit to commercial banks’ profits from ultra-low interest rates.



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