Japan Leader Keeps Up Pressure on Central Bank to Stimulate Economy

TOKYO — The incoming Japanese prime minister, Shinzo Abe, kept up his calls on Tuesday for the Bank of Japan to drastically ease monetary policy by setting an inflation target of 2 percent, and he repeated that he wants to tame the strong yen to help revive the economy.

Mr. Abe, who will be sworn in on Wednesday and is expected to appoint his cabinet on the same day, is prescribing a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and rein in the strong yen.

“The economy, diplomacy, education and rebuilding in the northeast,” which was hit by the 2011 tsunami, quake and nuclear disaster, “are in a critical situation. I want to create a cabinet which can overcome this crisis,” Mr. Abe told a news conference.

“We have advocated beating deflation, correcting the strong yen and achieving economic growth during the election, so we must restore a strong economy,” he said, adding that the stagnant economy was also undermining Japan’s diplomatic clout.

Mr. Abe, who quit abruptly as prime minister in 2007 after a troubled year in office, repeated that his new government hoped to sign an accord with the Bank of Japan to aim for 2 percent inflation, double the central bank’s current target.

“Once I become prime minister, I will leave it up to the BOJ to decide on specific measures on monetary policy,” Mr. Abe told a meeting with officials from the Keidanren, the major business lobbying group in Japan.

“I hope the BOJ pursues unconventional measures, including bold monetary easing,” he added.

His remarks were taken as maintaining pressure on the central bank to expand monetary stimulus more forcefully in order to tackle the deflation that has dogged Japan for more than a decade.

Mr. Abe’s opposition Liberal Democratic Party won by a landslide in this month’s lower-house election just three years after suffering a crushing defeat.

The party has threatened to revise a law guaranteeing the Bank of Japan’s independence unless the central bank sets a 2 percent inflation target. The B.O.J., which eased monetary policy in December, has promised to debate setting a new price target at its next policy-setting meeting on January 21-22.

Mr. Abe and his coalition partner, Natsuo Yamaguchi, the head of the small New Komeito party, agreed on Tuesday to set the inflation target and compile a big stimulus budget, Mr. Yamaguchi told reporters after the two met.

Mr. Abe is expected to draft an extra budget by mid-January.

Article source: http://www.nytimes.com/2012/12/26/business/global/japan-leader-keeps-up-pressure-on-central-bank-to-stimulate-economy.html?partner=rss&emc=rss