Taku Yamasaki, secretary general of the ruling Liberal Democratic Party, said Wednesday he will ask Bank of Japan Gov. Masaru Hayami to ease monetary policy further to prevent the economy from decelerating.
“I think there is no choice but to ease monetary policy,” Yamasaki said.
He plans to make the request at today’s meeting of ministers in charge of economic affairs and top ruling coalition policymakers.
Yamasaki said the writeoffs of banks’ bad loans are a top priority under the structural reforms advocated by Prime Minister Junichiro Koizumi.
“The debt writeoffs will inevitably be accompanied by deflationary pressures, and the question is how to deal with that,” he said, adding there is no other choice but to ease monetary policy.
During a trip to Washington last month with his coalition counterparts, Yamasaki met with top White House economic adviser Lawrence Lindsey, whom he said also wanted to see a further easing of Japan’s monetary policy.
Yamasaki has repeatedly called for more credit relaxation by the central bank since the government reported Monday that the economy contracted a real 0.2 percent in the first quarter of 2001 from the previous quarter for an annualized contraction of 0.8 percent.
BOJ ‘flexibility’ seen
Finance Minister Masajuro Shiokawa said Wednesday that Bank of Japan Gov. Masaru Hayami would be flexible in further relaxing the central bank’s grip on money.
Shiokawa quoted Hayami as saying that the BOJ “is considering taking a flexible attitude” on the matter at a meeting Monday of the Council of Economic and Fiscal Policy. The minister made the remark at a gathering of the House of Representatives Audit and Oversight of Administration Committee.
Some council members feel the BOJ “needs to take necessary action for the current economic conditions,” Shiokawa said.
They made note of a gap between Japan’s economic fundamentals and the actual state of the economy but did not make a direct request for the BOJ to take a more accommodative stance.
On Monday, the Cabinet Office said gross domestic product contracted a real 0.2 percent in the January-March quarter from the previous quarter, an annualized dip of 0.8 percent. For fiscal 2000, Japan achieved 0.9 percent growth, falling short of the government’s target of 1.2 percent.
The BOJ adopted a policy of quantitative easing on March 19 by shifting its monetary policy target from the unsecured overnight call rate to the balance of funds held in current accounts at the central bank, effectively resuming its “zero-interest-rate” policy.
Shiokawa said he does not think the government needs to immediately revise downward its economic growth projection of 1.7 percent for the current fiscal year, following the release of the weak GDP data.
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