Bank of Japan Governor Haruhiko Kuroda on Friday expressed confidence the central bank can stem bond market volatility with flexible market operations and engineer a steady recovery in the world's third-largest economy.
Kuroda said the central bank's aggressive monetary stimulus launched in April was a "necessary and sufficient" step to achieve its 2 percent inflation target, and will stimulate the economy through various channels including by directly influencing borrowing costs.
"What's most important is that the effect (of our monetary easing) creates a positive cycle of production, income and expenditure in the economy, leading to a gradual rise in prices. That's our hope and something that's achievable. We're in the process of this taking shape," Kuroda said in a seminar.
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Commenting on the recent financial market volatility, Kuroda stressed the BOJ's resolve to stabilise bond yields through market operations and enhanced communication with market participants.
"We don't have specific targets for stock prices or currency rates, and I won't comment on daily moves," Kuroda said.
"As for the bond market, where the BOJ is directly involved through market operations, stability is extremely desirable," he said.
Japanese government bonds plunged on Thursday, taking yields to their highest in a year and leading a selloff in bonds globally after Federal Reserve Chairman Ben Bernanke's remarks sparked worries of a reduction in U.S. monetary stimulus.
The Nikkei share average dived 7.3 percent on the same day, it's worst one-day loss in two years as Fed worries and weak Chinese manufacturing data rattled investors.
The shakeout in markets raised questions in some quarters about the all-or-nothing prescription of aggressive fiscal and monetary stimulus pursued by Prime Minister Shinzo Abe, although a majority of analysts were of the opinion that the violent asset price moves won't derail the policies.
The BOJ has offered several huge fund injections in its market operations in recent weeks, including the 2 trillion yen ($19.7 billion) cash in one-year contract on Thursday, to appease nervous investors. However, these steps have had only limited success in reducing volatility in the bond market.