TOKYO (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Tuesday that 3 percent inflation, a target proposed by the main opposition leader who is expected to win next month’s general election, would be unrealistic in a country where inflation has been below 1 percent for most of the last three decades.
The BOJ kept monetary policy steady on Tuesday, standing its ground in the face of calls from Japan’s likely next prime minister to pursue “unlimited” easing.
The following are highlights of Shirakawa’s comments during his press conference:
”Seeking 3 percent inflation would be unrealistic and in fact would have a big negative impact on the economy.
”Even during the bubble economy, inflation averaged only 1.3 percent.
”There are doubts as to whether the general public would consider prices to be stable when consumer prices are rising 3 percent.
”Escaping deflation is important, but if you look at different surveys, people don’t simply want prices to rise. I think what people are hoping for is that the economy will improve, which will lead to more output, higher wages and an eventual rise in prices.
”If you target 3 percent inflation, long-term yields could rise, and that would be a problem for public finances.
”The lessons of economic history show the importance of the concept of central bank independence. I want people to respect the BOJ’s independence.
“If you are going to change the BOJ law or any laws related to economic management then I think a long and thorough debate is necessary to reach a decision.”
”Japan’s exports and production are likely to continue to be weak. However, the economy remains on track to recover due to an expected rebound in overseas economies.
”Japan’s domestic demand could improve due to the recovery in overseas economies.
“We do not see any need to change the economic scenario in our most recent outlook report.”
Reporting by Stanley White