Economy BOJ Kuroda says Fed hike won’t spur exodus of funds from emerging...

BOJ Kuroda says Fed hike won’t spur exodus of funds from emerging markets

Bank of Japan Gov. Haruhiko Kuroda heads to a meeting at the headquarters of Bank of Japan in Tokyo Friday, Oct. 31, 2014. Japan's central bank expanded its asset purchases in a surprise move Friday to shore up sagging growth in the world's No. 3 economy. (AP Photo/Kyodo News)
Bank of Japan Gov. Haruhiko Kuroda heads to a meeting at the headquarters of Bank of Japan in Tokyo Friday, Oct. 31, 2014. Japan’s central bank expanded its asset purchases in a surprise move Friday to shore up sagging growth in the world’s No. 3 economy. (AP Photo/Kyodo News)

Bank of Japan Governor Haruhiko Kuroda dismissed concern an expected U.S. interest rate hike could jolt global markets, saying that emerging nations are now less concerned that tighter U.S. policy will trigger an exodus of funds from their economies.

While maintaining his optimism on Japan’s economic outlook, Kuroda reiterated his readiness to ease policy further if risks threaten achievement of its 2 percent inflation target.

“If risks materialise and lead to changes in trend inflation, the BOJ won’t hesitate to adjust policy as needed to achieve its price target at the earliest possible time,” he said in a speech to business leaders in Osaka, western Japan, on Monday.

Answering a question from one of the business leaders, Kuroda said the fact the U.S. Federal Reserve was eyeing an interest rate hike in the near future was testiment to the strength of the U.S. economy and was therefore positive for the global economy.

“Fears that U.S. rate normalisation would trigger a massive, sharp outflow of funds from emerging economies and disrupt the global economy appear to be receding somewhat,” he said.

When asked about the potential de-merits of yen declines, Kuroda said that while a weak yen helped boosted exports and manufacturers’ profits, it was true that yen declines hurt smaller firms and households by increasing import costs.

“Exchange rates ought to move in a way reflecting economic fundamentals. I think that understanding is shared by policymakers of Group of Seven leading economies,” Kuroda said.

The BOJ has kept monetary policy steady since expanding its massive monetary stimulus programme in October last year to prevent slumping oil costs, and a subsequent slowdown in inflation, from delaying a sustained end to deflation.

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