Abe and Kuroda Talk, Uncertain About More QE

by on April 15, 2014 4:52 pm BST

Japanese Prime Minister Shinzo Abe talked with Bank of Japan (BoJ) Governor Haruhiko Kuroda today, but it is uncertain whether or not the BoJ will take further steps to weaken the yen by purchasing additional assets. The two talked about current economic conditions, and it is widely speculated that a more aggressive stance on stimulus would be implemented  between now and July.

Both Abe and Kuroda expressed that they believe the three percent hike in sales tax this month will not hinder the economy from moving forward, but the combination of higher taxes and increased consumer prices will likely halt any increase in consumer spending. Economists believe that the BoJ will have to induce further easing in order to offset the decline in consumer spending.

Kuroda said “that if there were any developments that threatened to damage progress towards achieving our inflation target that I would adjust policy without hesitation.” The BoJ Governor pulled Japan out of deflation, but, with little wage growth, inflation is pinching Japanese wallets. There is also concern that exports have not expanded higher as expected during the yen’s massive decline.

Former BoJ policy board member Nobuyuki Kakahara – an informal adviser to Abe – said that more easing should not be conducted until next year. Kakahara said that it takes time for monetary policy to kick-in, and easing should not be rapidly compounded.