The Bank of Japan is signaling that Prime Minister Shinzo Abe’s government needs to do more to help achieve 2 percent inflation and revive the economy, former BOJ Policy Board member Sayuri Shirai said Wednesday.
Government stimulus, along with highly accommodative financial conditions, would support growth in the economy at a rate likely to be above its potential through March 2019, the central bank said Tuesday in its quarterly outlook report.
The BOJ’s message was that it is now up to the Abe government to do more, according to Shirai, whose term on the bank’s Policy Board ended in March.
“The BOJ sent a signal that the BOJ has done everything they could and already achieved very accommodative monetary environment and it’s now time for the government to do something to increase aggregate demand,” Shirai, a Tokyo-based professor of economics at Keio University, said in an interview Wednesday.
Many economists interpreted a BOJ policy shift in September as preparation for a sustained fight to generate inflation. Shirai said the bank would maintain the status quo on policy unless the yen surges or economic data deteriorate.
Now the focus is turning to fiscal policy. The government approved a second supplementary budget that includes a ¥28 trillion economic stimulus package.
Shirai spoke a day after the BOJ downgraded inflation forecasts and said consumer prices excluding fresh food would likely reach “around” its target of 2 percent around fiscal 2018. That would be after Gov. Haruhiko Kuroda’s term ends in April 2018. The bank maintained its forecasts for economic growth.
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