Central bankers at Davos brush off stimulus dangers

Fears of economic instability due to the slowing of massive monetary stimulus policies are unwarranted, top central bankers said at the World Economic Forum annual meet here, amid accusations that the easy money has won only a timid recovery.

"Normalisation from unconventional policy means success in the policy," said Haruhiko Kuroda, Governor of the Bank of Japan said on Friday.

He unveiled a vast asset-buying scheme in April as part of a broader plan by Prime Minister Shinzo Abe to reinvigorate the economy and eradicate years of deflation with a policy blitz, dubbed 'Abenomics'.

Kuroda told his Davos listeners that the very fact of worrying about how these policies would finish meant that they worked, but he was careful to add that Japan still had some way to go before the money taps would turn off.

In Britain, the BoE has pumped billions of pounds into the British economy and talk of an end to the stimulus scheme has grown since distinct signs of a turnaround emerged late last year.

"Monetary policy works," said British Finance Minister George Osborne. "It has worked and confounded those who said it would never work."

In Britain and Japan, the policy of choice has been quantities easing in which the central bank creates cash that is used to buy assets such as government and corporate bonds with the aim of boosting lending - and economic activity.

But QE is largely unprecedented and the consequences of scaling it back remain highly uncertain.

Last year, many emerging economies were hit hard by market instability when the US Federal Reserve said it was about to abruptly end its stimulus, wreaking havoc on stocks and currencies in several countries.