Shirakawa defends BOJ steps, hits back at Abe

Kyodo

Bank of Japan Gov. Masaaki Shirakawa defended the BOJ’s monetary policy Monday as an effective tool for controlling the yen’s ascent and prodded the government to make better efforts to combat deflation.

The BOJ has been the target of increasing blame for Japan’s economic woes in the runup to the Dec. 16 general election, with Shinzo Abe, leader of the conservative Liberal Democratic Party, calling for even more aggressive monetary easing as the solution.

But Shirakawa rejected Abe’s criticism of the BOJ’s easing efforts during a speech in Nagoya to local business leaders, noting that Japan’s monetary base — the amount of money supplied by the central bank — has been “more or less the same” as in Europe and the United States.

Shirakawa said the BOJ’s monetary easing scheme, including financial asset purchases, coupled with government yen-selling intervention, “has fended off the yen’s appreciation to some extent.”

He then pointed to failures in the government’s economic efforts.

“It is really important for the government — through measures such as decisive deregulation — to raise the attractiveness of domestic investment and lay the foundations that encourage firms to be adventurous.

“It is also important for the government to continue making efforts to ensure fiscal consolidation,” Shirakawa said.

The additional monetary easing steps being called for by Abe include forcing the central bank to buy government construction bonds from the market to finance a return to public works, and the setting of a higher inflation goal.

As for Japan, Shirakawa said the economy is “weakening somewhat” due mainly to the prolonged slowdown overseas and said it is “expected to remain relatively weak for the time being.”

Shirakawa repeated the central bank’s commitment to exercising “powerful monetary easing” until its medium-term price stability goal of 1 percent year-on-year growth comes into sight.