BOJ governor Kuroda warns against policies unwinding free trade

By Leika Kihara

WASHINGTON (Reuters) - Bank of Japan Governor Haruhiko Kuroda warned world policymakers against undoing the free trade and globalisation that he said have brought prosperity to many economies, particularly emerging nations.

Kuroda also said that while Japan's economic prospects were brightening, inflation was lacking momentum and justified maintaining the BOJ's massive monetary stimulus for some time.

"The global economy made great strides by consistently promoting free trade since the end of World War Two," Kuroda said upon arrival in Washington for the Group of 20 finance leaders' gathering and the International Monetary Fund meetings.

"My belief is that a multilateral framework promoting free trade will continue. There won't be huge changes to that," he told reporters on Thursday.

His comments came as world financial leaders gathered in Washington with pledges to work with U.S. President Donald Trump to fix lingering trade problems while vowing to keep their commitments to free trade and global integration.

Kuroda, formerly head of the Asian Development Bank, said that while policymakers must deal with poverty and income disparities widening in some countries, that did not mean they should abandon global free trade.

"Unwinding the more than 70-year postwar history of free trade and globalism isn't the appropriate approach," he said.

DOWNBEAT ON PRICES

Trump's protectionist approach to trade and European political risks have overshadowed brightening prospects for the global economy, driven by a rebound in manufacturing activity.

Japan has benefitted from global tailwinds that boosted exports and factory output, Kuroda said, describing its economy as "expanding steadily as a trend" - a more upbeat view than last month.

But he offered a bleaker view on Japan's inflation, saying it lacked momentum with no clear sign yet it was shifting up.

"That's why the BOJ will continue its ultra-easy monetary policy to achieve its 2 percent inflation target at the earliest date possible," he said.

Japan's economy has shown signs of life as exports and output rebounded thanks to a pick-up in global demand.

But core consumer prices for February rose just 0.2 percent from a year earlier, far from the BOJ's 2 percent target, as weak household spending discourages companies from raising prices and wages.

After three years of heavy money printing failed to drive up inflation, the BOJ reverted its policy framework last September to one better suited for a long-term war against deflation.

(Reporting by Leika Kihara; Editing by Chizu Nomiyama)