BOJ’s Kuroda says the stock boom reflects economic optimism and defends the ETF scheme

FILE PHOTO: Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a press conference at BOJ Headquarters in Tokyo, Japan on June 20, 2019. REUTERS / Kim Kyung-Hoon

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Tuesday that the recent stock price rally reflected market optimism about the global economic outlook and removed views that its ultra-loose monetary policy was burning an asset price bubble.

Kuroda said the central bank would be aware of the economic risks associated with prolonged easing and nodded to growing concern among some lawmakers that prolonged easing sowed the seeds for a bubble.

But he stressed that it was too early to discuss an exit from super-loose policies, including the BOJ’s huge purchases and holdings of exchange-traded funds (ETFs), as the coronavirus pandemic continues to ravage the economy.

“It will probably take a long time to reach our price target (inflation). As such, it is not time to think about an exit, including our ETF purchase, ”Kuroda told parliament.

The BOJ has unveiled a plan to review its policy tools, including its ETF buying program, in March to make it more sustainable as the pandemic forces it to maintain its stimulus for an extended period of time.

The plan reflects a growing concern among decision makers about the rising cost of extended relief. Some analysts also criticize the BOJ for continuing its huge ETF purchases at a time Tokyo stock prices have set new heights.

Kuroda said it was difficult to predict whether stock markets were in a bubble.

“Optimism about the global economic outlook and stable vaccine prevalence may be behind the recent rise in stock prices,” Kuroda said.

“But the global outlook remains very uncertain,” he said, adding that risks to Japan’s economy remained skewed.

Reporting by Leika Kihara; Clip by Kim Coghill

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