TOKYO—Bank of Japan Gov. Haruhiko Kuroda on Tuesday defended the central bank’s decision last month to boost its stimulus measures despite a split vote, saying the central bank needed to show its strong resolve to beat deflation.
In a speech to business leaders in Nagoya, central Japan, Mr. Kuroda even said he is willing to “continue” to act to ensure that the central bank will achieve its 2% inflation target by around next year.
Earlier in the day, the central bank released the summary of its Oct. 31 policy board meeting, where the proposal to implement additional easing measures passed by a thin 5-4 vote.
The minutes showed a sharp divide between Mr. Kuroda and some other board members over the effects of the new steps. Some members warned that the cost of the measures outweigh their benefits and questioned Mr. Kuroda’s fundamental strategy to boost inflation expectations through the expanded easing.
But Mr. Kuroda said the BOJ’s commitment to its price target is one of the “two engines” that influence such expectations. The other is the actual inflation rate, which is now around 1%.
“Therefore, the bank has considered it necessary to pursue monetary easing (more aggressively)…as well as to reiterate its unwavering resolution” to achieve its 2% price target, Mr. Kuroda said.
Shrugging off speculation that a divisive board could make it hard for him to ramp up further easing measures, Mr. Kuroda said there is no change in his stance to adjust policy “without hesitation” to make 2% inflation take hold if needed. “To achieve the price stability target, the bank has been taking ‘action’ and will continue to do so,” he said.
In addition to a split board, Mr. Kuroda is faced with falling public support for his policy. A recent public poll conducted by the Nikkei shows that one in two Japanese voters disapproves of Prime Minister Shinzo Abe ’s policy package, known as Abenomics, one main plank of which is the BOJ easing. Small firms and households are struggling with a combination of inflation, fueled partly by a weak yen brought on by the BOJ, and slower wage growth.
During a question-and-answer session following Mr. Kuroda’s speech, local business leaders told him that the yen’s rapid weakening has dealt a blow to small firms in the region by pushing up the costs of materials and other imports. “Please stay alert so the yen won’t become excessively weak,” one of the attendees said.
But while Mr. Kuroda promised to keep a close watch on exchange rates, he stopped short of issuing any verbal warnings to the market. He emphasized that some companies are starting to increase domestic investment. He also said that Nagoya’s economy, known as a major manufacturing hub in Japan, “tends to feel the benefits of a weak yen more easily” than other regions.
With more wage growth seen as essential in spurring higher inflation, Mr. Kuroda used the opportunity to urge business leaders to do their part.
“As a corporate strategy, using…profits in a more productive manner is imperative,” Mr. Kuroda said, adding that he will take great interest in labor-management wage negotiations in the spring of next year.
Separately, Mr. Kuroda expressed support for the recent move by China’s central bank to cut interest rates, saying it was “natural” and “sensible” considering decelerating inflation in the mainland. But he added that while China’s economy will likely expand at a rate of above 7% this year and next, such strong growth won’t last forever.
“Gradually the growth rate will decline from 7% to 6% and from there to 5% as the economy matures,” Mr. Kuroda said.