Monday saw the start of the Bank of Japan‘s monthly two-day policy meeting. As the Japanese government continues to pressure the financial institution into easing monetary policy to help stimulate the economy, many analysts predict this will the much talked about 2% inflation target finally announced.
While Japan has been struggling with years of deflation, BOJ Governor Masaaki Shirakawa has been resistant to setting an inflation target out of fear of hurting the country’s economy even more. However, the government’s Trade Minister Toshimitsu Motegi has said that they are determined to have a clear 2% target, adding that the many other countries with inflation goals have it at more than 1%. Motegi echoes Prime Minister Shinzo Abe’s comments that the central bank’s attempts at monetary easing until now have been “inadequate.”
Abe quickly followed up on his December election pledges of taking a more aggressive stance on ending Japan’s deflation. While hundreds of billions of dollars in stimulus have already been announced, Abe is determined to have the BOJ play its part as well. Many critics are concerned that all this pressure from the central government will lead to the central bank’s loss of independence. Those not in favor of the inflation strategy argue the point that it won’t do much to stimulate real demand if the prices go up without increases in purchasing power.
Shirakawa’s term ends in April, and the hunt for his replacement has already begun. It is already clear that the Abe-led government will look to nominate someone whose policies are in line with their goals.[via RTE News]