Japan premier ramps up pressure on central bank
TOKYO (AFP) – Japanese premier Shinzo Abe ramped up pressure on the central bank Monday, signalling he may move to limit its independence if it fails to achieve an ambitious inflation target.
His comments come just days after talks between finance heads of the Group of 20 leading economies avoided accusing Tokyo of orchestrating a fall in the yen by following an aggressive policy of monetary easing.
The prime minister – who swept to power in a landslide election win in December – warned that failure by the Bank of Japan to meet the two-per-cent target could open the door to “revising the BoJ law”.
Abe has previously warned he might change a law guaranteeing the bank’s independence if it did not follow his prescription of big spending and aggressive monetary easing to rescue the economy from decades of weak growth and deflation.
Threats to the BoJ’s independence have come in for criticism globally, with German central bank chief Jens Weidmann last month calling the moves “disturbing abuses”.
The BoJ, under pressure from Japan’s conservative government, last month unveiled the inflation target, which is aimed at dragging the country out of its long-running deflation, along with a plan for unlimited easing.
On Monday, Abe said the bank’s decision to tow the line last month saved it from any legislative changes, but warned that he still expected results.
“If it cannot responsibly deliver results, we would have to consider revising the BoJ law,” he told parliament.
He added that governments and central banks in Europe and elsewhere have previously agreed on inflation targeting.
Chris Tedder, research analyst at Forex.com in Sydney, said such changes could mean “Japanese politicians will be able to dictate policy at the BoJ”.
“This extreme action by Tokyo would mean that Abe and his party would be able to pursue extreme monetary loosening without any hindrance from BoJ board members,” he added in a note.