Hayami pans adoption of inflation target

Bank of Japan Gov. Masaru Hayami on Thursday rejected the notion of adopting an inflation target as a means of helping to raise prices and fight deflation.

“There is no data to support the procedure and the way to achieve it,” Hayami told a meeting of the House of Representatives Budget Committee.

Hayami has repeatedly rejected calls to this end, stating that it is difficult to raise prices using monetary policy alone and that inflation targets cannot be considered since interest rates are close to zero.

Hayami also rejected calls for the central bank to buy exchange-traded funds, a measure advocated by some within the ruling coalition.

“The BOJ has not run out of monetary adjustment measures and we do not intend to make purchases,” Hayami said.

Meanwhile, Toshikatsu Fukuma, a BOJ Policy Board member, said the same day that the central bank is ready to inject the banking system with funds in excess of its current target if this is deemed necessary.

“The BOJ intends to take flexible, appropriate policies while keeping a watch on trends,” Fukuma remarked during a speech in Fukuoka Prefecture.

“It is necessary to continue monitoring the demand for liquidity at financial institutions.”

He noted that the government’s drive to accelerate bad loan disposals, allied to the weaker management of banks in the wake of falling stock prices and valuation losses, has made the market wary of credit risks.

Fukuma said that implementing measures focused on small and midsize companies is an important element of tackling the deflationary trend.

He added that the central bank plans to advocate the establishment of a system under which smaller companies could effectively use any payments they have yet to receive for goods sold and services rendered as collateral in procuring funds from the market.