The Bank of Japan (8301) should aim for 2 percent inflation, Prime Minister Shinzo Abe said at the first meeting in four years of a panel that brings together government and central bank officials.
The government and the BOJ should strengthen cooperation to achieve the price goal, Abe said yesterday in Tokyo during a section of the Council on Economic and Fiscal Policy meeting that was open to the press. BOJ Governor Masaaki Shirakawa told reporters after the meeting that it was “meaningful” and that the bank is in close cooperation with the government.
The yen has weakened around 9 percent against the dollar since Nov. 14 as Abe’s calls for the BOJ to double its 1 percent inflation goal fuel speculation that the central bank will yield to pressure for more easing. The BOJ will introduce a 2 percent inflation target at its next board meeting on Jan. 21-22, the Asahi newspaper reported today.
“It’s obvious monetary policy in Japan will become looser,” said Tomoya Masanao, the head of portfolio management for Japan at Pacific Investment Management Co., manager of the world’s biggest bond fund, in an interview on Jan. 7. “Two percent inflation would be difficult to achieve unless the yen weakens massively.”
Consumer prices excluding fresh food, a benchmark monitored by the central bank, haven’t advanced 2 percent for any year since 1997, when a national sales tax was increased.
The yen was 0.2 percent lower at 88.08 per dollar as of 10:40 a.m. in Tokyo. The Nikkei 225 Stock Average was 0.6 percent higher, after gaining for the last eight weeks.
Finance Minister Taro Aso, who attended yesterday’s meeting, said on Jan. 6 that a formal accord on inflation targeting between the government and central bank may be unnecessary if the gatherings are held regularly.
“The meetings will force the BOJ and the government to work more closely together,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. “The market focus will be on the discussions between Abe and Shirakawa.”
Speaking at a press conference after the meeting, Minister for Economic Revitalization Akira Amari said that Shirakawa pledged to listen to views presented at the meeting. Abe said that deciding monetary policy was up to the BOJ, according to Amari.
Abe revived the council after it was abolished by the previous government. Minutes of the meetings will become available three business days after they are held, according to the Cabinet Office. The frequency of the meetings hasn’t been announced.
Academics and business leaders including Toshiba Corp. (6502) President Norio Sasaki will also attend.
“It’s immensely important that this is getting restarted,” said Robert Feldman, head of Japan economic research at Morgan Stanley MUFG Securities Co. in Tokyo. “We are going to learn a lot about the policy priorities of the government.”
Shirakawa’s five-year term as BOJ governor ends in April. Japan Chief Cabinet Secretary Yoshihide Suga said yesterday that the next BOJ chief should see the need for bold easing.
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