Arab Today, arab today underpressure boj adopts new inflation target
Last Updated : GMT 09:18:07
Arab Today, arab today
Arab Today, arab today

Under-pressure BoJ adopts new inflation target

Arab Today, arab today

Arab Today, arab today Under-pressure BoJ adopts new inflation target

Tokyo - AFP

The Bank of Japan on Tuesday adopted a two-percent inflation target and set out plans for indefinite monetary easing in a policy shift that Japan\'s new premier hailed as \"epoch making\". The moves -- set out in a rare joint statement with the government -- followed stern calls from the country\'s new administration led by Shinzo Abe to become more aggressive in kickstarting the anaemic economy. \"In terms of a bold review of monetary policy, this statement is epoch-making,\" Abe told reporters in Tokyo. Japan\'s economic revitalisation minister Akira Amari echoed his boss, saying it was an \"historic moment as the government and the Bank of Japan had never before expressed so clearly our commitments to achieve policy goals\". However, investors were unimpressed with the broadly expected announcement, with the Nikkei stock index losing 0.35 percent by the close despite an initial surge, and the yen climbing against the dollar and euro. Japan\'s new government, led by the hawkish Abe, swept to power last month on a pledge to fix the economy with big spending and to pressure the BoJ into aggressive action to kickstart the world\'s third-largest economy. Tensions have run high between BoJ policymakers and Abe\'s administration, with the 58-year-old premier having openly said he would like to turf out BoJ Governor Masaaki Shirakawa, whose terms ends in April, and threatening to change a law mandating the bank\'s independence if it does not fall into line. Japan\'s new finance minister, Taro Aso, has accused the bank of dragging its feet on tackling deflation. On Tuesday, Aso told the briefing, also attended by Amari and the BoJ\'s chief, that there was \"almost no relationship\" between government and the bank in the three years that the rival Democratic Party of Japan was in power. The yen has been in a steep decline for weeks as markets bet the BoJ would inflate its 101 trillion yen ($1.13 trillion) asset-buying programme, its main policy tool. \"The Bank will introduce a method of purchasing a certain amount of financial assets every month without setting any termination date,\" it said. It was the first time in nearly a decade that the BoJ has announced an expansion of monetary policy in consecutive meetings. The BoJ\'s asset purchases usually come with a fixed expiry date, but the new programme will see 13 trillion yen in monthly purchases \"for some time\" from its launch next year, it said. The policy is similar to the US Federal Reserve\'s unlimited monthly bond-buying programme, known as quantitative easing, unveiled in September. Also Tuesday, the central bank also raised its economic growth forecast for the fiscal year to March 2014, to 2.3 percent from a previous 1.6 percent estimate, and held interest rates at zero to 0.1 percent. The BoJ said it changed its previous inflation \"goal\" to a more explicit \"target\" due to the \"increasing awareness regarding the importance of flexibility in the conduct of monetary policy in Japan\". However, the move was likely to be viewed as the BoJ falling into line with government demands, but it may still fall short of satisfying Japan\'s premier. Two members of the policy board voted against the new inflation target demanded by Abe, the bank said. \"The Bank of Japan at least offered a gesture to work together with the government to tackle deflation, mainly by adjusting its rhetoric,\" said Yoshikiyo Shimamine, chief economist with Dai-ichi Life Research Institute. But \"the government is likely to step up pressure on the BoJ and this will also be reflected in Abe\'s nomination for a new bank governor\". On Monday, German central bank chief Jens Weidmann lashed out at what he called government meddling in the affairs of central banks in industrialised nations such as Japan and Hungary. \"We are witnessing disturbing abuses... where the new government is interfering massively in the affairs of the central bank, calling forcefully for a more aggressive monetary policy,\" he said. Japan has been beset by deflation since the 1990s. It continues to hurt the economy as falling prices cut into corporate profits, leading firms to slash jobs and put off growth-generating capital investment.

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