The Bank of Japan appears to be wavering in its commitment to unprecedented monetary easing, said Kozo Yamamoto, an adviser to Prime Minister Shinzo Abe and an advocate of reflationary policies.
“I’m worried the BOJ’s attitude is wavering,” Yamamoto said in an interview in Tokyo on Friday. “I wonder if Kuroda is being affected by fukumaden,” he said, which translated means “a den of conspirators.”
Yamamoto made the remarks after Gov. Haruhiko Kuroda signaled confidence that consumer price gains remain on track for a 2 percent target, even as inflation ground to a halt by the bank’s key gauge. The Abe administration is pursuing a strategy of shock therapy to revive the world’s third-biggest economy with steps including record purchases of government debt by the central bank.
Abe’s government and the BOJ agreed in January 2013 to set a 2 percent inflation target. Kuroda took over in March that year and unleashed unprecedented monetary easing the following month. The inflation target is not laid out in the current BOJ law.
Now, without aggressive new measures by the BOJ to boost prices, Yamamoto said he will start agitating for legislation to enshrine the inflation targeting agreement.
The term fukumaden became famous in Japanese politics when Makiko Tanaka, a former foreign minister, used it more than a decade ago to criticize Foreign Ministry bureaucrats’ resistance to her reform proposals in the administration of Prime Minister Junichiro Koizumi.
The BOJ declined to comment on this story.
“Kuroda should show that he will do whatever it takes to get the economy out of deflation in attitude and in deeds. He looks too optimistic in words,” said Yamamoto, who heads an economics advisory group in Abe’s ruling Liberal Democratic Party.
Yamamoto said he would decide on his strategy after looking at what happens on Thursday, when the BOJ’s board is set to meet on policy and present its outlook for growth and inflation. The central bank is forecast to keep its asset-purchase plan unchanged at the meeting, a Bloomberg survey of economists indicated this month.
The lawmaker singled out comments by Kuroda last week that central bank bureaucrats were studying technical details of how to manage an eventual exit from its stimulus. Kuroda said there hasn’t been any discussions of an exit at the policy-board level.
“They were inappropriate remarks,” Yamamoto said. “Kuroda shouldn’t mention an exit strategy now because people haven’t come completely out of a deflationary mindset. Kuroda’s recent comments seem to be too bullish.”
Kuroda has repeatedly pledged to maintain stimulus until consumer price gains are stable around the 2 percent target. The BOJ’s main gauge showed inflation slowing to zero in February, weighed down by oil price declines of around 40 percent in the past year.
Yamamoto isn’t alone in calling for the BOJ to mull fresh action to stoke growth. In its latest World Economic Outlook earlier this month, the International Monetary Fund said the central bank should consider strengthening its stimulus as necessary to attain its goal. The bank could boost the share of private assets in its purchases and extend its bond buying to longer maturities, the IMF said.
The lawmaker, known for his ties to Abe, has been calling for new laws on the BOJ for some time.
Under a proposal uploaded to Yamamoto’s website in 2013, the central bank would be given a deadline to achieve its inflation goal and would be obliged to provide regular updates on its progress to the government and the Diet.