The 2 percent inflation target will produce positive effects in six to 12 months if the Bank of Japan continues to take appropriate measures toward that goal, says Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe.
In a recent interview, the professor emeritus of economics at Yale University also called for revising the BOJ law so the government can set monetary goals, and only grant the central bank the freedom to decide what fiscal policies it can conduct.
“If it continues to implement policies that do not disappoint the public’s expectations, it will yield some results in six months to a year,” said Hamada, adding it is not very difficult for the BOJ to achieve the target.
Hamada, 77, hailed a joint statement adopted Tuesday by the BOJ and the government as “major progress” because it clearly shows the central bank will act in tandem with the government to carry out monetary policy, he said.
But Hamada still advocates revising the BOJ law. The government, he said, should set the goals for monetary policy because it is intertwined with job creation and the achievement of economic growth.
The nation’s inflation rate has been low or in negative territory because “the BOJ was not motivated” to drive it up, he said.
The BOJ exploited its independence to conduct monetary policy and did not respond to the government’s requests, Hamada said. “It was a big cause of the stagnation in the Japanese economy.”
On Tuesday, the BOJ set a 2 percent inflation target under government pressure to take more action to overcome deflation and released the joint statement with the government to implement “open-ended” easing, pledging to “pursue monetary easing and aim to achieve the inflation target at the earliest possible time.”
Hamada countered criticism from some European officials that Japan intends to revive its economy at the expense of its trading partners and that such a move could trigger a currency war.