BOJ likely to consider exit strategy by around FY 2019: Kuroda

Reuters

But he stressed the BOJ's resolve to maintain ultra-loose monetary policy with inflation distant from its 2 per cent target, dismissing calls by some analysts to raise its yield target before inflation hits that level. "Until now, the BOJ did not comment on exiting, but since it was reported that he commented on exiting, the market was startled". "Technically, however, this shouldn't come as a surprise as core inflation is expected to reach 2.3 percent by then".

Kuroda made the remarks before parliament where the government proposed his reappointment as BOJ chief for another five-year term. "We will be discussing that at each policy meeting".

The yen gained as much as 0.5 percent to 105.75 per dollar, while yields on Japanese sovereign debt climbed across the curve.

"Rather, his comment about an exit offered a ideal opportunity for investors to adjust positions before the weekend", she said.

Kuroda's nomination needs approval by both chambers of parliament, which is a near certainty as Prime Minister Shinzo Abe's governing coalition holds a comfortable majority.

Kuroda also said it is now premature for an exit as the target is still far off, adding that powerful monetary easing will remain in place.

"If comments are to be taken for face value, it spells a major turning point in BOJ policy", said Daisuke Karakama, senior market economist at Mizuho Bank in Tokyo. "I'm not saying that the negative rate of 0.1 percent and the around 0 percent aim for 10-year bond yields will never change, but it is possible". He suggested the BOJ will consider additional easing measures if necessary. He said at that time, they will consider a strategy to move away from the easing policy.

"If reappointed, I will put the finishing touch and make my utmost efforts to achieve the 2 percent price stability target by working with the government to guide the Japanese economy toward an exit from deflation", Kuroda said.

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