Kuroda defends the message of his 2015 ‘Peter Pan’ speech against deflation

By Leika Kihara

TOKYO, March 10 (Reuters) – Outgoing Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Friday that his 2015 “Peter Pan” speech, in which he explained the need for attitude and positive convictions to overcome deflation, was not his. idea, but he was confident in this message.

In June of that year, Kuroda alluded to the fairy tale when he explained that in order to fuel inflation, the Bank of Japan needed the public to believe in its monetary magic with a major stimulus shot.

Only with a firm commitment from the central bank to meet its 2% inflation target, he said, could Japan eradicate the public’s deflationary mentality.

“I hope many of you know the story of Peter Pan, where it says, ‘the moment you doubt you can fly, you cease to be able to fly forever,'” Kuroda said then. “Yes, what we need is a positive attitude and conviction.”

Shortly after the comment, inflation began to slow due to falling oil prices and the blow to consumers from a domestic sales tax hike, forcing Kuroda’s BOJ to backtrack with a change in 2016 of the current controversial monetary policy of controlling bond yields.

In a Friday briefing after his last policy meeting, Kuroda said the Peter Pan line “was not my idea, but the staff of the Bank of Japan.”

However, he stressed the importance of communication in guiding monetary policy, saying it was something he learned while studying economics at Oxford University.

“It’s wrong and absurd to say something you don’t believe in,” Kuroda said. “I still believe in doing what is necessary to achieve 2% inflation.”

Kuroda, whose second five-year term ends in April, leaves a mixed legacy at the BOJ: His massive stimulus package is lauded for pulling the economy out of deflation, but it has weighed on bank profits and distorted the market functions with low and prolonged interest rates.

Critics blame Kuroda for misleading markets in 2016, by abruptly introducing negative interest rates, and in December last year, when he shocked markets by allowing bond yields to continue to rise. increase.

“Personally, I did everything I could,” Kuroda said when asked how to communicate with the markets. “But I also know that I haven’t always been perfect.”

(Reporting by Leika Kihara; Editing by Nick Macfie, Spanish editing by Jose Munoz)