The Bank of Japan's monetary easing was "appropriate" and effective in jolting Japan out of deflation, and its retention under new leadership is of utmost importance as inflation expectations are heightening, outgoing Governor Haruhiko Kuroda said Friday.
In his last press conference as governor, Kuroda again expressed his regret over the BOJ's failure to attain its 2 percent inflation target before his term ends on Saturday.
Kuroda, who served for 10 years as BOJ chief from 2013, will hand the reins to academic Kazuo Ueda, a monetary policy expert who has taken the stance that monetary easing should be in place. The outgoing governor acknowledged that the past decade of unprecedented monetary easing has had side effects but denied that the policy tool had reached its limits.
"What is critically important is to promote economic growth and sustain wage growth through monetary easing," Kuroda, 78, said at the press conference.
"Monetary easing has shown its effects, and our guiding of policy has been appropriate," he added.
Kuroda's whirlwind tenure was devoted to beating deflation and meeting what he has described as a "global standard" of 2 percent inflation.
Inflation, as measured by the core consumer price index, excluding volatile fresh food items, hit 3.1 percent in February, though the BOJ expects the rise to be temporary absent robust wage growth. By comparison, when Kuroda became governor in January 2013, the rate had dropped 0.5 percent from a year earlier.
Kuroda, known for taking aggressive monetary easing steps that later became known as "bazooka," made a sensational pledge to achieve 2 percent inflation in two years and double the monetary base.
The BOJ began undertaking policies that often shocked financial markets, including introducing a negative interest rate in 2016, criticized for hurting banks' profitability.
The BOJ has been keeping short- and long-term interest rates depressed through massive purchases of government bonds. In recent months, the central bank has had to ramp up buying to counter market pressure, allowing for more flexibility in long-term yield moves.
As a result, the BOJ's bond holdings swelled to 581.72 trillion yen ($4.4 trillion) as of March, a record for any fiscal year-end, meaning that more than half of the outstanding Japanese government debt is owned by the central bank.
Sharp rises in long-term yields deal a blow to the debt-ridden government as it has to shoulder higher debt-servicing costs. Japan's debt is more than twice the size of its economy.