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CNBC Exclusive: CNBC Transcript: BOJ Governor Haruhiko Kuroda Speaks with CNBC’s Sara Eisen


Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Governor of the Bank of Japan Haruhiko and CNBC's Sara Eisen that aired today, Monday, April 23rd throughout CNBC's business day programming starting with CNBC's "Squawk on the Street" (M-F 9AM – 11AM.) The interview took place at the IMF Spring Meetings in Washington D.C. Following is a link to full video of the interview on

All references must be sourced to CNBC.

SARA EISEN: Governor Kuroda, thank you so much for sitting down with us. I wanted to start by asking you about the Japanese economy. Because we've seen a pretty strong growth streak. What happens next? What's your forecast?

HARUHIKO KURODA: You see, in the last eight quarters, the Japanese economy recorded positive growth in every quarter. And the average growth rate in the last eight quarters is close to 2%, which is well above Japan's potential growth rate of about 1%. So-- economy has been improving. Corporate sector enjoys historic high-level profit. Unemployment rate continues to decline to 2.5%, which is-- full employment situation. So the real economy is doing quite well. On the other hand, prices, although rising-- steadily, but still, consumer price inflation rate excluding fresh food, is only about 1%. And if you exclude energy items, then inflation rate is only about 0.5%. So there is still a long way to go to achieve the 2% inflation target. So—

SARA EISEN: How-- do you have confidence that you're gonna get there?

HARUHIKO KURODA: Yeah, yeah, yeah, yeah. But — in order to reach 2% inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time. It's necessary. But we are—


HARUHIKO KURODA: --confident. No, it's-- according to the latest forecast-- of the policy board-- it's-- around-- fiscal 2019, so maybe one to two years time. But this is only forecast. And still board members think that there is downside risk bigger than the upside risk. So risks are skewed to the downside. So anyway-- what is necessary for the Bank of Japan is to continue our-- our accommodative monetary policy, until the real economy inflation rate reaches 2%.

SARA EISEN: You've just started your new term. Congratulations.

HARUHIKO KURODA: Yeah, thank you.

SARA EISEN: How is this term going to be different than the last?

HARUHIKO KURODA: In the last five years—we implemented very accommodative expansion of monetary policy -- so that the economy greatly improved. Now, the economy is growing close to 2%. Unemployment rate is only 2.5%. The corporate sector enjoys historic high level profit. So the real economy is doing quite well. But inflation rate, excluding fresh food, is still around 1%. And if you exclude the energy items, then inflation rate is only 0.5%. So that means that-- in the last-- five years, monetary policy was successful in improving the real economy greatly. But the inflation rate has not yet reached the 2% target. So in the next-- five years-- we will continue our accommodative monetary policy, expansionary monetary policy to reach the 2% price target or inflation target. And then of course, we have to start normalization.

SARA EISEN: Are you thinking about that?

HARUHIKO KURODA: Oh, yeah. Because-- we think that-- it will not take another five years to reach 2%. And that means that-- sometime within the next five years, we will reach 2% inflation target. And we start-- discussing how to gradually normalize the monetary condition, so as to maintain around 2% inflation rate with a strong economic growth.

SARA EISEN: Does it worry you at all that the other major economies in the world are already there? They're-- they're already normalizing and moving off of zero interest rates.


SARA EISEN: And you're not there yet.

HARUHIKO KURODA: I think that is quite-- quite natural. Because the U.S. economy, look at the U.S. economy. Growing 2.5% to 3%. And the inflation rate is very close to 2%. So given this very strong-- robust economic growth with almost full employment and close to target inflation rate, naturally the Federal Reserve has already started normalization. They-- are now in the process of reducing the expanded balance sheet. And short term interest rates were raised already several times. Well, on the other hand, look at the European central bank. You see, they are still-- implementing very accommodative monetary policy. They have not yet started normalization process. And then Japan-- economic growth is okay. But inflation rate is even less than the inflation rate in the European-- or Euro zone. So-

SARA EISEN: So everybody's at different speeds.

HARUHIKO KURODA: That's right. That's right. Depending on the economic-- inflation situation, central banks must implement -- and adjust -- their monetary policies.

SARA EISEN: But broadly, what we're seeing globally is strength, synchronized economic recovery—

HARUHIKO KURODA: Oh, yeah. That's right.

SARA EISEN: --the best we've seen in years.

HARUHIKO KURODA: Yeah, that's right.

SARA EISEN: One thing, though, investors are wondering is, is this the peak? Is this as good as it gets, where everybody's growing together? What do you think?

HARUHIKO KURODA: I think two things. One-- there's no predetermined kind of cycle in the economy. And-- second, this time, we are still in the aftermath of the global financial crisis. Started in 2008, so that huge crisis and the negative growth, and from that point-- we have been recovering. So that-- naturally, recovery phase tends to be longer than usual. And at this stage, we don't see any imminent sort of turning point. As you know, IMF recently released the world economic outlook in which—

SARA EISEN: 3.9% this year and next.

HARUHIKO KURODA: Yeah, yeah. 3.9% this year and the next year. So world economic growth is likely to accelerate and maintain the high rate of growth this year and next year. So of course, you cannot expect eternal expansion. But for the time being-- this year, next year, we don't see any sign of— of— a turning point.

SARA EISEN: But we are seeing some increased volatility in global stock markets. What do you think is driving that?

HARUHIKO KURODA: As you know, from-- February this year, the U.S. studies show that-- somewhat-- stronger than expected wage increase and-- and-- employment increase. Then the long term interest rate responded quickly-- impacting stock-- stock market all over the world. But now, after some fluctuation, it's now sort of-- stabilized around the current level. So I think you are right that we have to continue to monitor carefully financial markets not just in the United States but all over the world-- so that, for instance, IMF-- made-- this is one of the risks faced by the world-- world economy that it is an unexpectedly faster pace of monetary tightening could have-- ramifications over the global financial market, as well as-- the economies of emerging countries. But—

SARA EISEN: There's also-- I was just gonna say—

HARUHIKO KURODA: My-- my-- my-- my point it should be carefully monitored. But-- and always, you have to be careful.

SARA EISEN: Well, one thing we have to be careful for is not to get into a trade war. And there is increased protectionist rhetoric from many places. How big of a risk is this for Japan and for global growth—

HARUHIKO KURODA: Yeah. I think, at this stage, probably this is the biggest risk faced by the world – world economy. Of course-- as far as Japanese economy is concerned-- at this stage, we are not much affected. But-- this kind of protectionist or inward-looking economic policies-- emanating from one country to another—retaliation and so on-- that would be very-- dangerous-- damaging to the world economy. So we have to be very careful-- and on the other hand, all countries, developed as well as developing-- they do understand the great contribution of free trade. So I really don't think the trade war would-- spread all over the world, and—that global trade goes down and the world economy. So I don't think-- I don't think something like that could happen. Or I should say, I hope never happens.

SARA EISEN: Well, one question with all of the rising rhetoric is, if something like that were to happen, do central bankers, like yourself, have the tools to deal with it? Because central banks have been maxed out on their crisis-fighting tools.

HARUHIKO KURODA: Yeah, yeah. Of course-- I mean, central banks, again, all over the world, have to take into account the global economic outlook, the financial market movement, and-- even-- the government-- fiscal policy and structural policy. All factors affecting the economy must be taken into account when the central bank decides its own monetary policy. And-- and so there may be such kinds of risk. And then of course we have to respond to-- maintain price stability and maintain high level of employment.

SARA EISEN: But do you have more tools.

HARUHIKO KURODA: Yeah, I think so.

SARA EISEN: You're using a lot of tools. But you have more. When it comes to trade-- this week, your prime minister was visiting President Trump. It looks like they're gonna go the route of a bilateral trade agreement instead of joining the TPP. Were you disappointed to hear that?

HARUHIKO KURODA: I'm not -- directly involved in summit meeting between Japan and United States. But as far as I know, from the Japanese side, I think Japan will continue to advocate the multilateral solution. We will continue to advocate TPP. And at this stage TPP-11 excluding the U.S. is agreed. But Japan very much wish the U.S. join, or re-join TPP. And I think that is still a priority of—Japanese government.

SARA EISEN: Another risk that the IMF warned about was rising debt levels, sovereign debt levels. When you look at Japan, it's the highest among all major economies, 236% of GDP. When should investors worry about that?

HARUHIKO KURODA: When government debt-GDP ratio surpassed 100%, there was a huge discussion. And the rating agencies downgraded Japanese government bonds. Now it's over 200%. Rating agencies-- have-- already downgraded before. At this stage— of course-- debt crisis is not erupting in Japan. First, because 95% of JGBs are held by residents – Japanese individuals, companies and financial institutions. And secondly Japan is still, by far, the largest net foreign asset holder. Because of that maybe, at this stage, no debt crisis is erupting. But I am quite sure that-- debt sustainability or sustainability of the public finance must be squarely-- restored or maintained. Once confidence in the government or the country is lost, it's very difficult to restore. So at this stage-- no crisis. But instead of crisis, what-- whenever financial markets fluctuate, Japanese Yen is seen as—

SARA EISEN: Safe haven.

HARUHIKO KURODA: --safe-haven currency.

SARA EISEN: Is that frustrating to you?

HARUHIKO KURODA: I should say that I don't understand why Japanese Yen is seen as-- safe-haven currency. But-- but anyway-- at this stage no-- debt crisis likely. But-- the government is determined to reduce, first, primary deficit, eliminate the whole primary deficit, and then-- try to reduce-- debt-to GDP ratio gradually over time.

SARA EISEN: Is the Japanese Yen too strong?

HARUHIKO KURODA: Exchange rate, as a central banker, I should-- refrain from making any comment. But what I can say is that exchange rates should reflect fundamentals. And since fundamentals move gradually, that means that exchange rates should-- move gradually, not fluctuate widely.

SARA EISEN: It is interesting that, during periods of volatility and rising fears of trade wars, the money goes into the Japanese Yen.

HARUHIKO KURODA: What you call safe-haven currency.

SARA EISEN: Safe-haven currency. And then on the other hand, your policy weakens the Yen. I wonder if this is a president, President Trump, that has tweeted before about currency manipulation and devaluation. Do you worry-- about being on the other side of that tweet?

HARUHIKO KURODA: You see, I don't think-- Japan is-- intentionally depreciating the currency. If anything, Japanese Yen, from time to time, appreciate too much. So I don't think-- Japan is-- is-- manipulating the currency in order to get—exports advantage. No, I don't think so.

SARA EISEN: What is your prediction for what we're gonna see as far as the global economy? You sounded very optimistic—


SARA EISEN: --over the next year.

HARUHIKO KURODA: Yeah. Next year-- this year, next year, like IMF world economic outlook. But I think-- the world economy will continue to grow at a relatively high pace. But as I said-- there are a number of-- potential risks. One of them is, of course-- protectionism. Another is-- unexpectedly rapid tightening of monetary conditions in some countries. And-- various geopolitical risk-- North Korea or the middle east. So-- there are-- several downside risks faced by the world economy. But-- I hope none of them-- actualize, realize, affecting the world economy in the next two years.

SARA EISEN: Finally, you mentioned North Korea. Is an escalation there a big threat, in your view?

HARUHIKO KURODA: I think-- I mean, again, geopolitical risks are completely outside of the territory of a central bank. But I really hope that-- that-- North Korean risk be-- contained and reduced in coming months and years.

SARA EISEN: Thank you so much, Governor Kuroda. It was a pleasure.

For more information contact:

Jennifer Dauble
t: 201.735.4721
m: 201.615.2787

Emma Martin
t: 201.735.4713
m: 551.275.6221

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