Japanese premier ups pressure on central bank
AFPTOKYO -- Japanese premier Shinzo Abe ramped up pressure on the central bank Monday, signaling he may move to limit its independence if it fails to achieve an ambitious inflation target.
February 19, 2013, 12:02 am TWN
His comments come just days after talks between finance heads of the Group of 20 (G-20) 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 ( BOJ ) to meet the 2-percent 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.
For months, Abe attacked the bank over what he derided as a timid approach to reviving the world's third-largest economy.
Bank Governor Masaaki Shirakawa, who disagreed with Abe on policy matters, is to step down next month, several weeks before the end of his term.
On Saturday a communique from the G-20 meeting in Moscow vowed to avoid “competitive devaluation” to boost exports.
The statement came after Tokyo faced charges it is manipulating the yen, particularly by Europe, and warnings that its actions could spark a currency war. Tokyo denies the claims.