TOKYO — Taro Aso, the newly appointed finance minister of Japan, said Friday that he wants the government to firm up its position on an accord with the central bank on an inflation target in January, before the bank’s next policy meeting, to attack the country’s entrenched deflation.
Mr. Aso also said the Japanese authorities stood ready to act against speculators’ driving the yen up or down excessively, saying that such activity could cause difficulties for the economy.
Prime Minister Shinzo Abe’s government is pursuing a policy of aggressive monetary easing — manipulation of interest rates and money supply — and heavy spending to beat deflation and weaken the yen and calling on the Bank of Japan to adopt an inflation target of 2 percent, double the current target.
Asked about the timing of a policy accord on the inflation target, Mr. Aso, a former prime minister, said it could come in January after the government mapped out an extra stimulus budget, shortly compiling requests Jan. 7 and before the Bank of Japan holds its next policy meeting Jan. 21.
The Bank of Japan eased monetary policy last week and has promised to debate setting a new price target at the January meeting.
The yen fell to its lowest level in more than two years versus the dollar Friday, to 86.64, under pressure from expectations that the new Japanese government would push the central bank into more aggressive easing. The yen strengthened in later trading.
“If excessive rises or falls in the yen due to speculation cause trouble for a lot of people, intervention would be a powerful tool, so there’s no reason why we would not use it,” Mr. Aso said.
“Under the current situation, where movements are gradual, I think it should basically be left to market mechanisms and fundamentals,” he added.
Asked whether Japan’s efforts to ease monetary policy and weaken the yen might lead to competitive currency devaluations, Mr. Aso said: “It’s wrong to say Japan is intervening unreasonably.”
Potentially adding more pressure on the Bank of Japan was the release of data Friday showing that Japanese factory output had fallen 1.7 percent in November, more than triple the median market forecast for a 0.5 percent drop. That followed a 1.6 percent gain in October, the first rise in four months.
Japanese manufacturing activity also put in a bleak performance in the Markit/JMMA Japan manufacturing purchasing managers index for December, released Friday, which declined at its fastest pace in more than three years.
Separate data released Friday showed Japan’s core consumer prices, which exclude volatile fresh food prices, edged down 0.1 percent in November from the level of a year earlier, in line with the median market forecast.
“If you look at data closely, there are also signs the economy will probably be bottoming out, so the data could simply offer the government a pretext to use its stimulus plan to support the recovery,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
Many economists warn that Mr. Abe’s emphasis on stimulus might have only short-term effects.
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