TOKYO (Reuters) - The Japanese government and the central bank are considering signing a policy accord that will set as a common goal not just achieving 2 percent inflation but also stable job growth, the Mainichi newspaper reported on Tuesday.
The accord, however, may not set a deadline or mention specific measures for achieving 2 percent inflation to leave the Bank of Japan with flexibility in guiding monetary policy, the paper said without citing sources.
The idea is likely among the several now being floated among central bank, financial ministry bureaucrats and politicians keen on showing to markets their resolve of taking bolder action to pull Japan’s economy out of the doldrums.
A final decision will be made at the BOJ’s next rate review on January 21-22, when the central bank will debate setting a higher inflation target than the current 1 percent goal.
New Prime Minister Shinzo Abe, whose Liberal Democratic Party (LDP) surged to power in December’s lower house election, has called on the central bank to take bolder monetary stimulus easing measures to beat deflation, and possibly hold it accountable not just for pushing up prices but boosting job growth.
Since taking power, Abe and senior LDP officials have kept up their pressure on the BOJ, but they have backed away from some of their more radical demands partly because the central bank has pledged to review its price target in January.
Finance Minister Taro Aso said on Sunday he won’t insist on signing a binding policy accord with the BOJ, as long as there is regular exchange of views with the central bank governor.
Adding job growth to the central bank’s mandate will require a revision to the current BOJ law, which only mandates it to achieve price stability, and may take time due to opposition from the BOJ wary of political threats to its independence.
Instead of revising the law, the government and the BOJ are thus considering issuing a non-binding statement setting job growth as among their shared goals, the report said.
The BOJ eased monetary policy five times in 2012 in an effort to overcome deflation including in December, when it also pledged to review its 1 percent inflation target in January.
It will likely consider setting a new 2 percent inflation target this month in response to Abe’s calls, although some in the BOJ are hesitant of setting such a goal without clear means to achieve it, particularly in a country that has been mired in deflation for more than a decade.
Editing by Chris Gallagher and Eric Meijer