Japan's incoming PM keeps up pressure on BOJ to attack deflation

Tue Dec 25, 2012 3:55am EST
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By Tetsushi Kajimoto and Stanley White

TOKYO (Reuters) - Incoming Japanese Prime Minister Shinzo Abe kept up his calls on Tuesday for the Bank of Japan to drastically ease monetary policy by setting an inflation target of 2 percent, and repeated that he wants to tame the strong yen to help revive the economy.

Abe, a security hardliner who will be sworn in as premier on Wednesday, when he is also expected to appoint his cabinet, is prescribing a mix of aggressive monetary policy easing and big fiscal spending to beat deflation and rein in the strong yen.

"The economy, diplomacy, education and rebuilding in the northeast (hit by the 2011 tsunami, quake and nuclear disaster) are in a critical situation. I want to create a cabinet which can overcome this crisis," Abe told a news conference.

"We have advocated beating deflation, correcting the strong yen and achieving economic growth during the election, so we must restore a strong economy," he said, adding that the stagnant economy was also undermining Japan's diplomatic clout.

Abe - who quit abruptly as prime minister in 2007 after a troubled year in office - repeated that his new government hopes to sign an accord with the BOJ to aim for 2 percent inflation, double the central bank's current target.

"Once I become prime minister, I will leave it up to the BOJ to decide on specific measures on monetary policy," Abe told a meeting with officials from major business lobby, Keidanren.

"I hope the BOJ pursues unconventional measures, including bold monetary easing," he added, maintaining pressure on the central bank to expand monetary stimulus more forcefully in order to tackle the deflation that has dogged Japan for more than a decade.

Abe's opposition Liberal Democratic Party (LDP) won by a landslide in this month's lower house election just three years after suffering a crushing defeat.   Continued...

Shinzo Abe, Japan's incoming prime minister and the leader of Liberal Democratic Party (LDP), speaks during a meeting at the LDP headquarters in Tokyo December 20, 2012. REUTERS/Yuriko Nakao