TOKYO Jan 13 Prime Minister Shinzo Abe said the
Bank of Japan (BOJ) must set a 2 percent inflation target and
make it a medium-term, not long-term, goal to show markets it
was determined to pursue bold monetary easing to end nearly two
decades of deflation.
The government is negotiating with the BOJ to issue a joint
statement this month to make the central bank accountable for
achieving 2 percent inflation, double its current price goal.
"The BOJ basically says it sees 1 percent inflation as a
loose goal. That doesn't show it's responsible to achieve it and
doesn't show its strong determination," Abe said told public
broadcaster NHK on Sunday.
"The statement must say clearly that 2 percent is the
target. That would lead to fundamental changes" in the way it
guides policy, he said.
The BOJ set its current 1 percent inflation target last
February and eased monetary policy five times in 2012.
Japan is stuck in its fourth recession since 2000 and its
export-reliant economy is suffering from a strong yen.
Abe, who won a landslide election last December, has piled
pressure on the BOJ for bolder efforts to beat deflation,
threatening to revise a law guaranteeing its independence on
monetary policy if his demands are not met.
Under intense pressure, the central bank will consider
easing monetary policy at its rate review on Jan. 21-22 and
respond to Abe's calls to double its inflation target, sources
have told Reuters.
In the joint statement likely to be released on Jan. 22, the
BOJ wants to describe the new target as a long-term goal without
setting a specific deadline, to leave itself flexibility in
guiding future monetary policy.
Abe, however, warned that making 2 percent inflation a
"long-term goal" wasn't good enough. "That's too long. It should
be a medium-term one. Otherwise markets won't react," he said.
The Council on Economic and Fiscal Policy, the government's
top economic panel which the BOJ governor attends regularly,
could call a meeting to focus on monetary policy and a
timeframe, Abe said.
Abe also said he will meet with monetary policy experts on
Tuesday, including his special economic adviser Koichi Hamada,
to seek views on who would be suitable as next BOJ governor.
"Basically, I'd like to choose someone who can implement
bold monetary policy and who shares our views," he said.
Abe's government has the power to nominate a successor to
BOJ Governor Masaaki Shirakawa when his term expires in April,
although the nomination needs approval by both houses of
parliament. Abe controls the lower house but the upper house.
Japan last week approved a $117 bln stimulus package, the
biggest spending boost since the financial crisis, to try and
boost the economy. Abe is gambling that a shift to a more
expansionary fiscal policy and more monetary easing from the
central bank can end years of stop-start growth.