BoJ governor targets end of deflation

Bank of Japan governor Haruhiko Kuroda began his campaign to end 15 years of deflation by doubling monthly bond purchases in a bid to reach 2 per cent inflation in two years.

With Mr Kuroda presiding over his first meeting since taking the helm last month, the board today streamlined its asset purchase programs, temporarily suspended a cap on some bond holdings and dropped a limit on debt maturities.

The BOJ will buy 7 trillion yen ($74 billion) of bonds a month, the central bank said in a statement. Stocks pared losses and the yen weakened immediately after the announcement, signalling Mr Kuroda may be winning investors' confidence as he targets 2 per cent inflation and a revival in the world's third-biggest economy.

The central bank said that the time horizon for the price goal is two years.

"The biggest task for Kuroda is to manage expectations," Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former central bank official, said before today's announcement. "The first meeting is crucial but he has a very long and probably bumpy road to achieve his 2 per cent inflation target."

The Nikkei 225 Stock Average was little changed as of 1.55pm local time after paring earlier losses. The index is up about 40 per cent from mid-November. The yen slid to 93.86 per dollar, down 0.9 per cent.

The central bank's monthly purchases of government bonds stood at an average of about 3.4 trillion yen in the first quarter, according to data compiled by Bloomberg. The BOJ said it had changed the target for money-market operations from the overnight call rate to the monetary base.

Bloomberg