New economic and fiscal policy minister Seiji Maehara pledged a closer watch over the Bank of Japan to ensure it meets a 1 percent inflation goal, adding that purchases of foreign bonds may be a powerful tool for easing.
“Now I am in this position, I will scrutinize even more strictly” the BOJ’s efforts to achieve its target, Maehara, 50, said Monday. If the BOJ’s actions are insufficient, he said he will do more than “just talk.”
Newly appointed Finance Minister Koriki Jojima, 65, said that central bank purchases of foreign bonds are an issue that “requires cautious handling and consideration,” suggesting he may have less enthusiasm for the idea.
Jojima also said the government will “take bold actions against the currency’s excessive moves if necessary,” echoing comments used by predecessor Jun Azumi to signal that intervention in currency markets remains an option.
Investors and analysts are looking for clues to any policy shifts after Prime Minister Yoshihiko Noda reshuffled his Cabinet on Monday ahead of an election that may come as early as this year.
In the case of Jojima, the nation’s fifth finance chief in three years and a newcomer to the Cabinet, limited financial expertise may increase his reliance on ministry bureaucrats and lessen his own input.
“We know almost nothing about his economic or financial policies,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd.. “He likely will follow the Finance Ministry’s stance of intervening if necessary.”
Noda’s reshuffle came as tensions with China cloud the outlook for trade and deeper declines in consumer prices show deflation remains entrenched.
A 48 percent gain in the yen against the dollar in five years has hit exports and manufacturing. Azumi oversaw the sale of a record ¥8 trillion in market intervention last October after the yen hit a postwar high of 75.35 to the dollar.
Tasks that Jojima must tackle include persuading opposition leader Shinzo Abe to back legislation for deficit-financing bonds so the government doesn’t run out of money.
“I am not a true expert, but I don’t think I’m so terrible at it,” Jojima said when quizzed by a reporter on his experience with finance and currencies.
Maehara has been the leader of the Democratic Party of Japan and stepped down as foreign minister five days before the March 11, 2011, earthquake and nuclear disaster over allegations he violated campaign financing laws, and also served as transportation minister, overseeing the successful turnaround plan for Japan Airlines Co.
As DPJ policy chief, Maehara said in August it would be “desirable” for the government and the BOJ to reach a deal allowing the bank to purchase foreign securities to help stimulate the economy. BOJ Gov. Masaaki Shirakawa has opposed the idea, which would require the bank to identify and manage appropriate foreign assets.
Maehara “is fairly aggressive on monetary easing,” said Hiromichi Shirakawa, chief economist in Tokyo at Credit Suisse Group AG.
Weakness in exports may be strengthening the case for adding foreign-bond purchases to the BOJ’s tool kit. Implementing the policy would alter the relationship between the bank and the Finance Ministry, which Azumi has said should control currency interventions, such as those conducted since the March 2011 earthquake to weaken the yen.
“If we do not correct the extreme yen appreciation, then Japan’s manufacturing will not hold up,” Maehara said Tuesday. “I think the current yen level is too high.”
Answering reporters Monday night, Jojima said his former role as deputy policy research chief for the DPJ is relevant to his new role and he has “shown an interest in my own way” in finance and currency issues. Recent yen moves were partly because of “fears about the European debt crisis,” he said.
“Jojima isn’t much known in financial markets, but he was probably picked because of his bargaining ability with opposition parties,” said Yoshimasa Maruyama, chief economist at Itochu Corp.. “He will inherit policies that Noda’s administration and the Finance Ministry have set.”
Visitors to Jojima’s blog get few insights into his views on the yen or the economy. He referred to the currency’s strength once in 26 posts this year, and the economy three times. Last month, he wrote on his love of animals and reforming the electoral system.
A graduate of the University of Tokyo where he majored in agriculture, Jojima was first elected to the Diet in 1996. Before entering politics, he was head of the worker’s union at food company Ajinomoto Co. and wrote a book on labor relations. His office wall is decorated with pictures of livestock and a sign saying he cured a 100-cigarette-a-day smoking habit by going cold turkey.
The new finance minister’s first appearance on an international stage will be next week as he and Shirakawa host the annual meetings of the International Monetary Fund and World Bank in Tokyo.
Execs want fast action
Business leaders are expressing hope that the new Cabinet of Prime Minister Yoshihiko Noda will quickly deal with pressing issues, such as election system reform and passing the bill allowing the government to issue deficit-covering bonds before it runs short of money.
Hiromasa Yonekura, chairman of the Keidanren business federation, called on Noda to dissolve the Lower House soon, saying in a statement issued that the prime minister “should seek to test his public mandate” as he agreed to do with the Liberal Democratic Party and New Komeito.
Yonekura also said the Cabinet should deepen cooperation with opposition parties because the nation is in “an extremely difficult phase” in the wake of the March 2011 quake and tsunami, and is facing a variety of economic, energy, diplomatic and security matters.
Yasuchika Hasegawa, chairman of the Japan Association of Corporate Executives, urged the government to participate in negotiations for the Trans-Pacific Partnership free-trade system, saying “there is no time left to postpone a decision.”
Toyota Motor Corp. President Akio Toyoda said in a statement as chief of the Japan Automobile Manufacturers Association that the territorial dispute that ignited recent anti-Japan demonstrations in China is beginning to have widespread repercussions.
“The negative impact from the China issues is spreading to the entire Japanese economy, including the automobile industry, as well as citizens’ lives and cultural exchanges,” Toyoda said.
He called on the government to work hard on settling the issues.