• Kyodo

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Japan said Tuesday it will continue to pursue structural reforms through a combination of policies in such areas as deregulation, the financial sector, taxation and government spending to put its economy on a sustainable path to recovery.

The government will keep working together with the central bank to bolster the nation’s financial system and combat deflation, Bank of Japan Gov. Toshihiko Fukui said on the first day of a two-day annual meeting of World Bank and International Monetary Fund member economies.

Fukui, Japan’s representative at the annual meeting, also expressed Japan’s positive stance for international efforts to rebuild Iraq, saying Japan is “committed to make efforts” to make an upcoming donors’ ministerial meeting in October a success.

But he did not touch on specifics over how Japan will get involved in the reconstruction process.

Fukui’s pledge came a day after Prime Minister Junichiro Koizumi underscored his structural reform stance by retaining economic policy and financial services minister Heizo Takenaka in a Cabinet reshuffle.

Several LDP heavyweights had demanded that Koizumi remove Takenaka, a reform figure called the prime minister’s intellectual engine, from at least one of his two Cabinet portfolios, saying his financial sector reform initiatives were too radical.

The antideflation pledge also followed a call Sunday by IMF Managing Director Horst Koehler on Tokyo to “aggressively” ease its monetary grip as part of efforts to quell persistent price falls.

Fukui said the BOJ is “firmly committed to” maintaining its ultra-easy monetary policy “until the consumer price index stably registers zero percent or above.”

The comment apparently was intended to keep financial markets from pushing up long-term interest rates on expectations that the central bank’s quantitative easing policy is about to end.

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