Japanese Prime Minister Shinzo Abe seeks a “bold policy leader” as the next Bank of Japan (8301) governor as he aims to end deflation and drive a recovery from recession.
The choice of a successor to Masaaki Shirakawa, whose term ends in April, will be made after consultations with Yale Professor Emeritus Koichi Hamada and others, Abe said yesterday on public broadcaster NHK’s “Sunday Debate” program.
The government and central bank need to agree on implementing a 2 percent inflation target to end deflation, Abe said. The prime minister last week announced a 10.3 trillion yen ($115 billion) spending package, which includes money to stimulate private investment to boost the economy.
“We want someone who can push through bold monetary policy,” Abe said. “We are thinking hard about fiscal discipline as we form the next fiscal year’s budget. Still, the economy isn’t going to change unless we display a firm commitment to escape deflation at the same time.”
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. They fell 0.1 percent in November, compared with a year earlier.
The yen was trading at 89.48 at 10:50 a.m. in Tokyo, after earlier touching 89.67, a 2 1/2 year low. The currency has weakened more than 10 percent since mid-November.
Japan’s gross domestic product shrank at an annualized 3.5 percent pace in the third quarter after contracting in the three months ended June, meeting the textbook definition of a recession.
Abe’s extra spending will help deliver real annualized GDP growth of 3.5 percent in the second quarter of this year, Nomura Holdings Inc. said in a report last week. The brokerage raised its GDP forecast for the fiscal year starting in April to 1.8 percent from 1 percent, citing the impact of the stimulus program and improved prospects for exports with the weaker yen and a recovery in the U.S.
The spending will include about 3.1 trillion yen for revitalizing local economies, medical services, child care and other measures, the government said last week. Measures to stimulate private investment will include steps to promote clean energy and energy saving.
Toshiro Muto, Haruhiko Kuroda, Kazumasa Iwata and Takatoshi Ito are potential candidates to succeed Shirakawa, the Nikkei newspaper reported today, without citing anyone. Muto and Iwata were both previously deputy governors of the BOJ, while Kuroda and Ito have worked at the Ministry of Finance.
Abe said yesterday he would also like to increase defense and coast guard spending in next fiscal year’s budget.
A territorial dispute between Japan and China is raising tensions between the countries. China dispatched two J-10 fighters to the East China Sea on Jan. 10 to monitor two Japanese F-15s that were trailing a Chinese patrol aircraft, the Ministry of Defense said on its website the following day.
The incident comes as China asserts sovereignty over uninhabited islands that are administered by Japan, known as Senkaku in Japanese and Diaoyu in Chinese. Japan purchased the islands from their private Japanese owner last year, straining relations between the world’s second-and third-biggest economies.
Abe also said on the program yesterday that he would like to have a U.S.-Japan summit in February.
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