By James Saft
(Reuters) – Just as Mario Draghi’s pledge to “do whatever it takes” to preserve the euro is being challenged, the very same unqualified promise, this time to simply stop prices falling, is about to be put into action in Japan.
In both cases within months we may well discover if it is the promises or the problems which are without limits.
In Japan, newly appointed Bank of Japan Governor Haruhiko Kuroda will on Wednesday convene a two-day policy meeting, his first after assuming office and pledging to do – again those words – “whatever it takes” to end years of deflation.
While Kuroda’s supporters would probably stress that “whatever it takes” is in this instance a process rather than an event, the BOJ is widely expected to take radical new steps in its quest to achieve a 2 percent inflation target within two years. Media have reported the central bank intends to move to begin “open-ended” bond purchases directly rather than in 2014, as well as to start buying longer-term bonds and possibly expanding the range and scope of purchases of other assets such as equities.
Open-ended, at least in this context, means that the central bank will buy bonds until its goal is achieved, but the promise is likely to be rather thin on the issue of exactly how it will ratchet up its actions as the months pass and, as may well be, prices stubbornly refuse to rise.