Abe says his BOJ chief must be deflation foe

Kyodo

Prime Minister Shinzo Abe said Wednesday he wants the next Bank of Japan chief to fully understand his policies for battling chronic deflation and revitalizing the struggling economy.

Economic and fiscal policy minister Akira Amari is set to attend the central bank’s Policy Board meeting next week, government sources said, adding to expectations that the BOJ will accede to the prime minister’s directive to further monetary easing until achieving 2 percent inflation annually.

“We will choose someone who can appreciate my (goal to establish) basic policies to beat deflation,” Abe told reporters, adding that a successor to BOJ Gov. Masaaki Shirakawa, who ends his five-year stint in April, must be a “person with firm determination and ability.”

The comments came after the prime minister met Tuesday with economic and finance experts, agreeing with them that bold monetary easing by the BOJ is crucial in a time of deflation.

The meeting, the first of its kind since Abe took office in December, effectively marked the start of the government’s search for the next BOJ governor.

Abe has been urging the BOJ to loosen its monetary grip more aggressively until it achieves a 2 percent year-on-year increase in the consumer price index, with some analysts warning that any excessive intervention by the government in monetary policy could weaken the central bank’s independence.

The BOJ Policy Board, which meets Monday and Tuesday, is widely expected to sign an accord with the government, introducing the inflation targeting, while the bank has maintained the “price stability goal” of a 1 percent increase.

At the Policy Board meeting, Amari, also minister in charge of economic revival, is likely to explain the new government’s policy, including the recently decided ¥20 trillion economic stimulus package entailing over ¥10 trillion in budget spending by the national government, the sources said.

The agreement between the bank and the government is also expected to include requirements for the government to go ahead with structural reforms and boost the country’s growth potential.

The nomination must pass both chambers of the Diet, with the Liberal Democratic Party-led ruling coalition lacking a majority in the Upper House.

“We will not be able to pass a nomination without help from opposition parties,” Chief Cabinet Secretary Yoshihide Suga said Wednesday, indicating they will need to consider the views of opposition parties.