Japan's prospective PM keeps up calls for bold BOJ stimulus

Tue Nov 27, 2012 4:04am EST
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By Leika Kihara

TOKYO (Reuters) - Japan's opposition leader and likely next premier, Shinzo Abe, kept up his rhetoric on Tuesday for bolder monetary and fiscal stimulus, warning that the country cannot restore fiscal health unless it beats deflation.

Abe, the leader of the Liberal Democratic Party (LDP) that is tipped to win next month's election, stressed that overcoming deflation was crucial not just to revive growth but also to fix Japan's fiscal health.

Tax revenues would not increase, he said, unless companies and households started spending more in the belief that prices would rise in the future.

Abe also said that if the government were to set a policy target for the Bank of Japan it would not necessarily be infringing on the central bank's independence, as long as it retained the freedom to decide how to do it.

"The government and the BOJ should achieve a policy accord and discuss an inflation target to pursue bold monetary easing. The 1 percent 'goal' already announced by the bank won't do. It must instead be a 'target' of 2 percent," Abe told a symposium debating Japan's growth strategy.

"Most central banks in the world, except for that of Japan, set policy targets with the government or in response to requests from the government," he said, reiterating his view that the BOJ should be held accountable not just for achieving price stability but for boosting job growth.

Abe, a former prime minister chosen in September to again head the LDP, has called for the BOJ to pursue "unlimited" monetary easing, set a 2 percent inflation target and have it share a common goal with the government possibly by revising a law guaranteeing its independence.

The demands have pushed down the yen on expectations that more aggressive policy loosening may be forthcoming if Abe wins the election.   Continued...

Shinzo Abe, the head of Japan's main opposition Liberal Democratic Party, speaks during a lecture entitled,"The path to the rejuvenation of Japan," in Tokyo November 15, 2012. REUTERS/Yuriko Nakao