Haruhiko Kuroda, the Japan government's nominee to be the next Bank of Japan governor, has said that he will do whatever he could to pull the economy out of deflation if he assumes the post, signaling more aggressive monetary easing measures in the offing.

Kuroda, a well-known advocate of aggressive policy easing, is a contender for the post of the Bank of Japan governor that falls vacant after the current head of the central bank, Masaaki Shirakawa, leaves the job March 19 along with his two deputy governors.   

Kuroda, 68, president of the Asian Development Bank, is the nominee of Prime Minister Shinzo Abe. He is likely to be appointed as BOJ governor next week, as he has the backing of the main opposition parties as well. The nomination need to be approved by both lower and upper houses of the parliament. The ruling party controls the lower house while opposition parties have majority in the upper house of the parliament.

The Abe government hopes that Kuroda’s appointment as the new governor could push the central bank towards adopting bolder monetary measures to back the government fiscal stimulus. 

Addressing the Japanese parliament, Kuroda said: “I would like to make my stance clear that we will do whatever we can do.” 

In line with the expectations that he will be backing the aggressive monetary policy of the Abe government if he is elected, Kuroda said that the BOJ's current policies were not powerful enough to boost inflation to 2 percent, a target he said the central bank should strive to achieve in two years, Reuters has reported.

He added that the BOJ should consider its open-ended asset purchases before its scheduled start in 2014 to stimulate the economy mired in recession.

"It would be natural for the BOJ to buy longer-dated government bonds in huge amounts," Kuroda said in a confirmation hearing in the lower house of parliament. "But the central bank also needs to scrutinize market developments at the time, as well as the potential drawbacks."

He said that he would not set any limits on the amount of cash the Bank of Japan pumped into the economy.

The prospect of the BOJ buying longer-dated bonds prompted a market rally, led by the longer end bonds. Yields on 20-year bonds dropped to a seven-month low of 1.550 percent. Yields on 5-year debt hit a record low of 0.110 percent, Reuters reported.

The Abe government last month announced aggressive fiscal measures to boost the economy and to end a 15- year long deflation. The radical measures invited criticism from the G-7 and G-20 countries as it led to sharp depreciation of the yen. The domestic currency depreciated to a three-year low while the markets popped to a four-year high after the Abe government announced the aggressive measures.

Admitting that the monetary easing could lead to a currency war among the competing nations, Kuroda said: "There's evidence that currencies tend to fall for countries that ease monetary policy on a large scale ... But the BOJ's policy is not targeting currencies." 

"The important thing is to ensure price stability and achieve the 2 percent price stability goal, although it could affect currencies in that process," he added.

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