Japan is solving its long-running problem with deflation, and U.S. economic growth should accelerate to 3 percent through the end of 2015, Japan's top central banker said in Wayzata on Sunday.
Haruhiko Kuroda, the governor of the Bank of Japan, stopped in Minnesota on his way home from meetings in Washington, D.C., and spoke to the Economic Club of Minnesota.
He said a stable level of inflation is returning to Japan after 20 years of deflation, thanks to the Bank of Japan's massive intervention in the economy, known as QQE.
The bond-buying program, which is similar to the U.S. Federal Reserve's now-retired quantitative easing but larger in scope, has helped push up inflation expectations and inflation in the world's third-largest economy, Kuroda said.
"There's no doubt that the underlying trend of inflation has improved markedly," Kuroda said.
Wage negotiations in Japan this spring are the latest evidence of improvement. Wages rose in the "spring offensive" last year, when labor and management typically determine base pay for workers, and look like they will rise more in 2015, Kuroda said. For a nation where deflation has been an intractable problem since the mid-1990s, the news is encouraging.
"QQE is starting to achieve what some may have thought impossible," Kuroda said. "If Japan can successfully overcome deflation and re-anchor inflation expectations, as it is in the process of doing, this will be a major step in monetary policy history, not only in Japan, but also around the globe."
Asked for his outlook on the U.S. economy, Kuroda noted "subdued" growth in the first quarter thanks to bad weather in some parts of the country and labor strife at Pacific ports. But he said slow growth will likely accelerate in the rest of the year.
"From the second quarter onward, I'm reasonably sure that the U.S. economy could achieve around 3 percent growth," he said. "The U.S. recovery is quite solid, and the U.S. will continue to lead the global economic recovery."
Kuroda was introduced by Walter Mondale, the former vice president and ambassador to Japan. Mondale noted that Kuroda is the highest-ranking Japanese government official ever to visit Minnesota.
He visited the Twin Cities at the invitation of Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis. Kocherlakota has been a vocal advocate of using monetary policy to drive up inflation in the U.S. economy.
Inflation in Japan and America is below the central banks' targets of 2 percent.
After his speech at the Wayzata Country Club, Kuroda and his entourage stopped at the Minneapolis Institute of Arts, home to the largest permanent display of Japanese art in the Western world.
Adam Belz • 612-673-4405
