BOJ To Implement Economic Measures
Business Manners in Japan
Bank of Japan Governor Masaaki Shirakawa acknowledges that Japan’s economy is in a severe situation due to deflation and a strong yen, signalling the central bank’s readiness to offer further monetary stimulus if the fragile economic recovery is threatened.
 
The Federal Reserve’s pledge last month to keep interest rates near zero at least until late 2014 briefly pushed up the yen against the dollar on expectations it will aggressively ease monetary policy, leading to some calls from lawmakers that the BOJ should loosen policy further to counter yen rises.
But Shirakawa shrugged off criticism that BOJ was not as aggressive as the Fed, stressing that both central banks share similar goals of achieving economic growth with stable prices and adding that the Fed itself has explained that its long-term price goal was not an explicit “inflation target”.
 
“I even feel that the Fed’s policy is getting closer to ours,” he told an upper house during the budget committee meeting.
 
The BOJ has pledged to keep near-zero rates until price stability, which it considers as consumer inflation of roughly around 1 percent, is within sight. That statement has also drawn criticism from some politicians as being too vague, and they argue that the BOJ should set an explicit inflation target.

But it is against setting an explicit target and committing to do whatever it can to achieve it for fear of losing flexibility in guiding policy.
 
The BOJ has stood pat on policy after easing in October last year, but is ready to loosen again through an increase in asset purchases if Japan’s recovery prospects are threatened.

“We acknowledge that the problems Japan faces such as the current deflation and yen strength are very severe,” Shirakawa said.
“The BOJ will implement appropriate steps through close examination of the economic situation,” he added.

BOJ Executive Director Masayoshi Amamiya said high levels of public debt in advanced economies were making it even tougher for central banks to tweak policy as financial systems could be destabilised.

“The question of how to pursue price stability and financial system stability at the same time is one of the biggest challenges that central banks in advanced economies will have to face,” he said at a seminar.
 
Prime Minister Yoshihiko Noda also said on Monday that Japan needs to overcome deflation in order to resume a recovery, and that putting the economy back toward sustainable growth was the government’s top priority.

“There are things the government should do and things the BOJ should do. That distinction needs to be sorted out, then the two sides will do what they can do,” Noda told the parliamentary meeting.

The yen last week edged towards to a record high set against the dollar in October last year, sparking concern that Japanese authorities may step in to curb its strength. The greenback has since trimmed losses against the yen on Friday’s upbeat U.S. jobs data.

Economics Minister Motohisa Furukawa said that while the yen has appreciated due to a loss of trust in other currencies such as the dollar and the euro, countries should not try to rescue their economies by devaluing their currencies.

“We should compete in a fair situation,” he said in the same parliamentary committee meeting.
 

Source: Reuters

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