Hayami’s remarks draw additional fire

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Bank of Japan Gov. Masaru Hayami’s comments of last week attracted a barrage of criticism Thursday from Liberal Democratic Party politicians nervous about the fragile economy as a snap general election is apparently just around the corner.

Hayami hinted in an April 12 news conference that the BOJ may end its 14-month zero-interest-rate policy by the end of the year. This unusual policy is designed to help pull the economy out of its worst postwar recession by minimizing fundraising costs for banks and firms.

The surprise remark met with a thumbs-down from the United States and the International Monetary Fund, both of which believe it would be premature for the BOJ to lift the ultraeasy monetary policy, as fears of deflation in Japan have not abated.

None of the members of the LDP’s Investigation Committee for Finance and Banking Systems defended Hayami during their meeting Thursday, according to committee head Hideyuki Aizawa.

Some blamed Hayami’s remarks for the plunge in Tokyo stocks the following day, while others lamented the central bank being granted independence from the government in the first place, Aizawa said, adding that one lawmaker even said Hayami should have resigned when former Prime Minister Keizo Obuchi was replaced after falling into a coma.

BOJ Deputy Gov. Yutaka Yamaguchi, who was present at the meeting, confirmed the April 10 decision by the bank’s policy board to continue the zero-interest policy, Aizawa said.

Aizawa admitted that the ultraeasy monetary policy hurts pensioners, who rely on interest on their bank deposits. LDP Secretary General Hiromu Nonaka has actually applauded Hayami’s comments for that reason. But Aizawa stressed that economic recovery must come first if interest rates are to rise.

In December, Hayami issued a statement that made market players mistakenly believe the bank had changed its policy to consider foreign exchange rates. Eisuke Sakakibara, the vocal former vice finance minister for international affairs, rebuked Hayami and urged him to resign.

As to his latest remarks, Hayami says he wanted to speak of future prospects through “communication” with markets.