Prime Minister Shinzo Abe said his real economic objectives, including full employment, have been achieved even though 2 percent inflation has not, pointing to a further softening of the government’s commitment to a price goal seen as one of the cornerstones of Abenomics.
“It’s true that the 2 percent price target hasn’t been reached, but while we have a kind of 2 percent price stability target, our real objectives, including those for monetary policy, such as spurring job growth to reach full employment, have been achieved,” Abe told the Diet on Monday.
He was responding to a question about the economy and policy following data earlier in the day that showed first-quarter growth was faster than first estimated.
The remark came on the same day that Bank of Japan Gov. Haruhiko Kuroda emphasized in a Bloomberg interview his commitment to the price goal, saying he would take further action if momentum was lost. In March, Finance Minister Taro Aso talked of the need for the BOJ to take a more flexible view on reaching 2 percent inflation, fueling speculation that the government was no longer taking the target so seriously. If that conclusion is true, there could be less pressure on Kuroda’s BOJ to act should price growth face a setback over the coming months.
Abe said Monday that he wouldn’t comment on the BOJ’s eventual exit strategy, which he said he would leave to central bank policymakers. While economists say the BOJ is running out of firepower to support prices and overall growth, Kuroda said the central bank still was capable of big stimulus measures if needed.
Concern remains that a global slowdown, escalating trade tensions and a planned sales tax increase in Japan could derail the economy and sink prices. Despite the positive result for gross domestic product released Monday, Abe acknowledged that there were still latent risks for the economy and pledged to put together a macroeconomic stimulus package without hesitation should those risks materialize. He once again denied any link between his economic policy and Modern Monetary Theory, saying that his administration was committed to stably lowering Japan’s government debt-to-GDP ratio. In the six years since Abe launched his Abenomics program, unemployment has fallen from 4.3 percent to as low as 2.3 percent, a 26-year low. Still, a tight job market has failed to boost wages by the amount needed to increase consumption and prices as much as hoped.
Core inflation was 0.9 percent in April, compared with minus 0.2 percent in December 2012 when Abe returned to office