A lawmaker who has advised Prime Minister Shinzo Abe on economic policy said he will urge the government to enshrine its inflation-targeting agreements with the Bank of Japan in law as early as next year.
Kozo Yamamoto’s comments come as the central bank is said to be considering lowering its inflation forecast for the year through March 2016 further below the 2 percent goal agreed with the government in 2013. It would be desirable to have a new BOJ bill ready by the end of the year for submission to the Diet in 2016, Yamamoto, who heads an economics advisory group in the Liberal Democratic Party, said in an interview on Monday in Tokyo.
While the government and central bank agreed in January 2013 to set a 2 percent inflation target and Gov. Haruhiko Kuroda then embarked on unprecedented monetary easing, the target is not laid out in the current BOJ law.
Masazumi Wakatabe, an economics professor at Waseda University seen by Bank of America Corp. and UBS Group AG as a potential candidate for a BOJ policy board position, also said the Abe administration should codify in law the BOJ’s inflation target to boost the effectiveness of monetary stimulus.
“Strengthening the BOJ law will be the key point for reviving Abenomics,” he said in an interview on Friday in Tokyo.
Under a proposal uploaded to Yamamoto’s website in 2013, the central bank would be given a deadline to achieve the goal and would be obliged to provide regular explanations of its progress to the government and parliament. Yamamoto’s proposal would be the basis for discussion of a new bill, he said.
Yamamoto said it would be difficult for inflation to reach 2 percent in 2015 given a setback to the economy from a sales-tax increase last April. Nevertheless, consumer price gains will accelerate in the second half of the year, spurred by a boost in stimulus by the BOJ last October, he said, adding that he hopes the target will be reached in 2016.
Yamamoto said he will seek the change in the law next year because the Diet session starting later this month is likely to be dominated by defense and security bills after Abe reinterpreted the pacifist Constitution last year.
Long a proponent of expanding the monetary base, Yamamoto held study groups on the topic, in which Abe took part, while the LDP was in opposition. Last year’s delay to a second increase in the sales tax came after lobbying from Yamamoto.