The policy draft released by the finance ministry reiterated the goal of achieving 2% inflation, as pursued by the central bank under governor Haruhiko Kuroda. But this time it added the words “sustainably and stably” in reference to how the goal established in 2013 by Abe’s government should be met. (File pic: Boj HQ.)
TOKYO: Prime Minister Fumio Kishida is likely to want the Bank of Japan (BoJ) to stick with its current policy direction even after a change of governor, according to a senior ruling party member.
Shouji Nishida, head of a pro-spending group in the party with ties to former premier Shinzo Abe, pointed to the fiscal policy plan published last week as proof that Kishida is more committed than previously thought to the BoJ’s inflation target.
The policy draft released by the finance ministry reiterated the goal of achieving 2% inflation, as pursued by the central bank under governor Haruhiko Kuroda. But this time it added the words “sustainably and stably” in reference to how the goal established in 2013 by Abe’s government should be met.
“What that means is the policy cooperation with the BoJ established under Abenomics must be continued,” said Nishida.”It means that the next BoJ governor must stay on Kuroda’s path.”Nishida’s comments come amid strong interest over who will succeed Kuroda when he steps down next spring.
Economists and investors want to know whether Kishida will look to reposition the BoJ away from the ultra-low interest rate stance that has helped push the yen down to two-decade lows as other central banks hike rates to curb inflation.
The change of wording also suggests Nishida’s group could be gaining traction as a voice within the Liberal Democratic Party.
Kishida’s New Capitalism plans and his talk of increasing the defense budget suggest the government may be embarking on more spending. To fund different projects, Japan will need more debt issuance and will benefit from rates staying low.
“The economy hasn’t completely recovered yet,” said Nishida. “If monetary policy changes here and rates rise, the economy will certainly collapse.” — Bloomberg
