BOJ's Kuroda warns of risks to hitting inflation goal

November 13, 2016 8:30 PM EST

Bank of Japan (BOJ) Governor Haruhiko Kuroda listens a reporter's question during a news conference at the BOJ headquarters in Tokyo, Japan November 1, 2016. REUTERS/Kim Kyung-Hoon


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By Leika Kihara

NAGOYA, Japan (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Monday the economy is sustaining momentum towards hitting the central bank's 2 percent inflation target but risks are tilted to the downside due to uncertainty over the global economy.

Kuroda maintained his optimistic view of Japan's economy, saying it is likely to expand moderately as exports and output rebound, reflecting an expected improvement in overseas demand.

But he acknowledged that private consumption was "somewhat lacking momentum" and making some companies hesitant of raising prices of their goods and services.

"The BOJ will pursue powerful monetary easing and make policy adjustments as appropriate, taking into account economic, price and financial developments, to maintain the momentum toward achieving 2 percent inflation," Kuroda said in prepared remarks to business leaders in Nagoya, central Japan.

The BOJ switched its policy target to interest rates from the pace of money printing in September, after years of massive asset purchases failed to jolt the economy out of stagnation.

It pushed back the timeframe of hitting its ambitious 2 percent inflation target in October, as weak consumption and falling import costs from a strong yen weigh on price growth.

Kuroda stressed that next year's wage negotiations between companies and labor unions would be crucial to whether Japan will see inflation accelerate toward 2 percent.

He added that a tightening job market is expected to gradually push up wages. The hit to inflation from falling oil costs will dissipate early next year and help Japan's consumer inflation turn positive in coming months, Kuroda said.

Japan's core consumer prices fell for a seventh straight month and household spending slumped in September, underscoring the challenges of hitting the BOJ's target.

(Reporting by Leika Kihara; Editing by Chris Gallagher and Kim Coghill)



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