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BOJ Kuroda offers upbeat view on China, U.S. outlook despite risks

Bank of Japan Governor Haruhiko Kuroda gives his speech during a seminar in Tokyo September 20, 2013. REUTERS/Yuya Shino
Bank of Japan Governor Haruhiko Kuroda gives his speech during a seminar in Tokyo September 20, 2013. REUTERS/Yuya Shino

By Leika Kihara

OSAKA, Japan (Reuters) - Bank of Japan Governor Haruhiko Kuroda voiced confidence on Tuesday that the economies of China and the U.S., Japan's two big export markets, will continue to recover and help achieve the central bank's 2 percent inflation target.

Kuroda said the world's third-largest economy was making steady progress toward meeting the BOJ's price goal, but reiterated his readiness to offer additional monetary stimulus if that path is threatened by external risks.

"We are ready to take appropriate policy adjustments without hesitation if either upside or downside risks materialize," he told business leaders in Osaka, western Japan.

Kuroda brushed aside the view, held by some pessimists in the market, that exports may not increase enough in time to make up for an expected downturn in household spending when Japan raises its sales tax in April 2014.

"U.S. and Chinese economies, which are important in terms of the impact on Japan's economy, will continue to recover... albeit some risks remain," he said.

China is promoting structural reforms that may slow growth but the country's policymakers will likely take appropriate action to stimulate the economy if necessary, Kuroda added.

The BOJ has kept monetary policy steady since delivering an intense burst of stimulus in April, under which it pledged to double base money via aggressive asset purchases to accelerate inflation to 2 percent in roughly two years.

DIFFERING VIEWS

At a rate review last week, the BOJ revised up its economic forecast and stuck to its projection that Japan was on track to see 2 percent inflation in two years.

But three of the nine board members rejected the projections, underscoring a rift between those optimistic about meeting the price target and those who share the dominant market view that it will take much longer than two years for Japan to have 2 percent inflation.

Kuroda countered such doubts, saying that prices were rising for a broader range of goods and services reflecting a steady recovery in the economy. He also said he saw no huge risks to the BOJ's baseline scenario that overseas economies will pick up gradually and support exports.

The governor repeated that despite improvements in the economy, it was too early to openly debate an exit strategy from the BOJ's ultra-easy monetary policy. But he did acknowledge the need to scrutinize plans internally within the bank.

"We won't adopt a policy without any idea for an exit," he said.

(Reporting by Leika Kihara; Editing by Shinichi Saoshiro)

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