Aug. 25 (Bloomberg) -- Governor Haruhiko Kuroda said the Bank of Japan’s decision to step up stimulus is paying off in the economy and financial markets.
The campaign “has started to exert effects,” Kuroda told the Federal Reserve Bank of Kansas City’s annual conference in Jackson Hole, Wyoming yesterday. Bond purchases have been “exerting strong downward pressure on the nominal interest rates.”
Japan’s central bank is buying more than 7 trillion yen ($70.9 billion) in bonds each month to expand the monetary base by 60 trillion yen to 70 trillion yen per year. It seeks to generate inflation of 2 percent within two years after 15 years of battling deflationary forces.
Kuroda said the push has helped boost stock prices and restrain bond yields, while supporting bank lending and bolstering confidence among consumers and businesses. Inflation expectations are also picking up, he said.
“We think that at least in the next two years or so we would be able to contain increases in long-term interest rates, so as to maintain low real interest rates,” he said.
Consumer prices rose in June, and the world’s third-biggest economy expanded at an annualized 2.6 percent in the three months through June 30. The benchmark Nikkei 225 Stock Average is up 31 percent this year.
A report this week showed Japan’s exports in July jumped 12.2 percent from a year earlier, the most since 2010, aiding Prime Minister Shinzo Abe’s efforts to drive the recovery.
Japan will maintain the bond-buying strategy “while continuing to make efforts to maintain the stability of the global financial system,” Kuroda said.
--Editors: James Tyson, Christopher Wellisz