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China slowdown unlikely to hit Japan exports much: BOJ Governor Haruhiko Kuroda

Date 27-Aug-2015
Subject China slowdown unlikely to hit Japan exports much: BOJ Governor Haruhiko Kuroda

NEW YORK : China's economic slowdown should not harm Japan's exports very much in coming years, and falling oil prices will not stop the Bank of Japan from hitting its inflation target, BOJ Governor Haruhiko Kuroda said on Wednesday. 

Kuroda, addressing a New York audience, said China's economy is likely to slow further although he predicted growth in its gross domestic product (GDP) will remain at 6-7 per cent this year and next. 

"Already exports to China have been affected, but I do not think that Japan exports in coming years will be (very) negatively affected," Kuroda told a seminar hosted by the Japan Society. 

That is "partly because China will maintain 6 to 7 per cent growth and Japanese capital goods are... quite competitive," he said. 

Kuroda said China's monetary easing is an appropriate step to mitigate any impact on its economy, adding that some market players have become "too pessimistic" on the Chinese economy given its growth is "still quite robust". 

On US monetary policy, Kuroda said he expected the Federal Reserve to raise interest rates sometime this year, which would be a strong positive signal for the global economy. 

NO EASING NEEDED - FOR NOW 

Japan's economy shrank in April-June as exports slumped and consumers cut spending, adding pressure on Prime Minister Shinzo Abe to step up his drive to lift the economy out of decades of deflation. 

China's economic slowdown, which recently sparked a global stock market selloff, has increased the odds any rebound in Japanese growth in July-September will be modest. 

Kuroda maintained his optimism that despite overseas headwinds, Japan can hit the BOJ's inflation target without additional monetary stimulus. 

It is "far from the case" that the BOJ will fail to meet the target, Kuroda said, adding the oil drop will only temporarily impact overall prices. 

"We think that the 2 per cent inflation target would be achieved with the current QQE," he said. "So at this stage we have no concrete proposal for further accommodation." 

But Kuroda added the BOJ will "certainly" ease monetary policy if needed to achieve its price target, stressing "many options" were available. 

The BOJ deployed a massive stimulus program, dubbed quantitative and qualitative easing, or QQE, in April 2013 and expanded it in October 2014 to accelerate inflation to 2 per cent through aggressive asset purchases. 

But consumer inflation has ground to a halt due to soft household spending and slumping oil, keeping the BOJ under pressure to expand monetary support. 

Many BOJ policymakers are hesitant to raise asset purchases, wary of the program's rising costs and distortion to the government bond market, which is increasingly dominated by the BOJ. 

Source : economictimes.indiatimes.com

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