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5/5/2017, 8:16 AM (Source: TeleTrader)
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BoJ's Kuroda: Wages are advancing sustainably

For two quarters the Japanese economy has showed a strong recovery trend and 1.5% growth is expected for this year and next, Haruhiko Kuroda, head of the central bank, told CNBC on Friday. Speaking in Yokohama, he underscored the rate substantially tops the medium-term potential and that the output gap is closing, and stressed domestic businesses are seeing all-time highs in profits, with "huge cash to spend." In the words of the governor of the Bank of Japan, the improvement in investments is now being "somewhat belatedly" followed also by workers' earnings.

The headline inflation has been "quite slow to adjust upward," particularly because of the declines in oil prices in the past two years, Kuroda added and noted the corporate sector and labor unions alike have operated in a deflationary environment for a decade and a half. He expressed belief the expansionary monetary policy will eventually lead to a significant rise in prices. The goal of 2% inflation is seen "around fiscal 2018," starting next April, the governor stated. He declined to outline a strategy for tightening. Kuroda highlighted data that show small and medium-sized firms are raising wages faster than corporations, explaining that central bankers look at it as a sign of sustainability.

Taro Aso, deputy prime minister and minister of economy, earlier said Japan's government is a proponent of free trade and that the yen in a stable currency, where its value must be determined by market mechanisms.

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