April 2 (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
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.