‘Peter Pan’ speech on deflation wasn’t my idea, says BOJ’s Kuroda, but it was right

FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda speaks during a news conference after a meeting of G7 leaders on the sidelines of G20 finance ministers’ summit on the outskirts of Bengaluru, India, February 23, 2023. REUTERS/Samuel Rajkumar

By Leika Kihara

TOKYO (Reuters) – Retiring Bank of Japan Governor Haruhiko Kuroda said on Friday his 2015 “Peter Pan” speech explaining the need for a positive attitude and belief to defeat deflation wasn’t his idea, but that he trusted its message.

In June of that year, Kuroda alluded to the fairy tale in explaining that to fire up inflation, the BOJ needed to have the public believe in its monetary magic with a huge blow of stimulus.

Only with strong central bank commitment to achieve its 2% inflation target could Japan eradicate the public’s deflationary mindset, he believed.

“I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’,” Kuroda said back then. “Yes, what we need is a positive attitude and conviction.”

Soon after the comment, inflation began to slow on plunging oil prices and the hit to consumption from a domestic sales tax hike, forcing Kuroda’s BOJ into retreat with a shift in 2016 to the current controversial bond yield control policy.

At a briefing on Friday after his final policy meeting, Kuroda said the Peter Pan line “wasn’t my idea but something the BOJ’s staff came up with”.

But he stressed the importance of communication in guiding monetary policy, saying it was something he learnt during his days studying economics at Oxford University.

“It’s wrong and absurd to say something you don’t believe in,” Kuroda said. “I still believe it’s necessary to do whatever it takes to achieve 2% inflation.”

Kuroda, whose second, five-year term ends in April, leaves the BOJ with a mixed legacy: his massive stimulus is praised for pulling the economy out of deflation, but it strained bank profits and distorted market functions with prolonged low interest rates.

Critics blame Kuroda for wrong-footing markets in 2016, by abruptly introducing negative interest rates, and in December last year when he stunned markets by allowing bond yields to rise further.

“Personally, I did my best,” Kuroda said when asked about communication with markets. “But I also know I haven’t been perfect all the time.”


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