TOKYO'S pick to head the Bank of Japan (BoJ) yesterday ruled out purchases of foreign bonds to stoke the economy, as the country faced criticism it was engineering a yen devaluation.
Some politicians and economists have said the central bank should adopt such measures as a policy option, which would likely push the value of the yen down further as it would require selling huge amounts of the unit to purchase foreign-denominated debt.
That could aggravate months-long criticism from abroad, particularly in Europe, that Tokyo was devaluing the unit to help exporters, risking a global currency war that would see rival nations try to push down their currencies.
Haruhiko Kuroda, a finance veteran expected to become Japan's top central banker, told a parliamentary confirmation session yesterday that "there is no need to consider" foreign bond buying as a policy option.
"It is the government's responsibility to achieve stability in foreign exchange markets. It is not part of BoJ's duty as a central bank. Its duty is to stabilise prices," he said.
Kuroda also said under his stewardship, BoJ would move to meet a two per cent inflation target that policymakers adopted in January, aimed at reversing years of falling prices that have crimped private spending and business investment.
Meanwhile, BoJ board member Koji Ishida voiced caution against taking unorthodox options too hastily, saying that buying longer-dated bonds or scrapping a cap on the bank's bond holdings would warrant a major overhaul of its policy framework.
He also said BoJ was already effectively buying assets in an open-ended manner as it aims to pump more money into the economy via an asset-buying and lending programme, shrugging off the need to tweak the way it buys assets now.
Kuroda has called for more aggressive monetary stimulus to beat deflation. He has said the central bank should consider buying longer-dated bonds and scrap a self-imposed rule of capping its bond holdings to size of bank notes in circulation.
But Ishida said such steps should be considered only after a thorough review of BoJ's monetary policy framework and its policy objectives.
"The asset buying programme is the backbone of the BoJ's current monetary easing structure.
"Changing this would be a big shift in its policy framework and would require a comprehensive examination of the purpose, means, costs and effects as well as the transmission channel of monetary policy," he said. Agencies