• Kuroda says Japan’s economy has started picking up
  • Japanese banks have enough core capital to make them resilient to external shocks, including rising interest rates
  • The process to overcome deflation is also the process for the financial system to recover its vigor

“If the economy recovers and profit margins on lending improve, rising interest rates won’t much affect the soundness of banks, while the failure of the economic recovery and the emergence of concerns about fiscal reform could have adverse effects on banks.”

  • He doesn’t see excessive expectations
  • Says yield rise is negative if not led by economic hopes, its best if yield rise is based on economic expectations
  • BOJ’s easing is to lower yield curve & risk premium
  • He doesn’t see major problem with Japan’s financial system and expects japan’s recovery around the middle of this year
  • Need to change inflation expectations to achieve 2% target
  • The credibility of the BOJ won’t recover unless deflation is ended
  • And that excessive risk-taking can destabilize financial system

Nothing new from Kuroda in this speech. Given the volatility in the yen last week, I expect a volatile opening Monday in the New Zealand morning.