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Incoming Japanese PM pressures central bank to stimulate economy

By Reuters,December 25, 2012

TOKYO —Shinzo Abe, who will become Japan’s prime minister Wednesday, kept up his calls on for the Bank of Japan to drastically ease monetary policy by setting an inflation target of 2 percent, and repeated that he wants to tame the strong yen to help revive the economy.

Prime Minister Yoshihiko Noda’s Cabinet resigned Wednesday to clear the way for a vote by parliament’s lower house later in the day to formally install Abe as the nation’s new leader.

Japanese media have said Abe will name former prime minister Taro Aso, 72, as finance minister; former trade and industry minister Akira Amari as minister in charge of a new economic revival headquarters; and policy veteran Toshimitsu Motegi as trade minister. Motegi also will be tasked with formulating energy policy in the aftermath of the Fukushima nuclear disaster last year.

Abe, 58, has promised aggressive monetary easing by the Bank of Japan and big fiscal spending by the debt-laden government to slay deflation and weaken the yen to make Japanese exports more competitive.

“We have advocated beating deflation, correcting the strong yen and achieving economic growth during the election, so we must restore a strong economy,” Abe told a news conference Tuesday, adding that the stagnant economy was also undermining Japan’s diplomatic clout.

Abe, who quit abruptly as prime minister in 2007 after a troubled year in office, repeated that his new government hopes to sign an accord with the Bank of Japan to aim for 2 percent inflation, double the central bank’s current target.

“Once I become prime minister, I will leave it up to the BOJ to decide on specific measures on monetary policy,” Abe told a meeting with officials from a major business lobby, Keidanren.

Abe’s opposition Liberal Democratic Party (LDP) won by a landslide in this month’s lower house election just three years after suffering a crushing defeat. The party has threatened to revise a law guaranteeing the BOJ’s independence unless the central bank sets a 2 percent inflation target.

The BOJ, which eased monetary policy in December, has promised to debate setting a new price target at its next policy-setting meeting Jan. 21 and 22.

Abe and his coalition partner, the head of the small New Komeito party, agreed on Tuesday to set the inflation target and compile a big stimulus budget, New Komeito leader Natsuo Yamaguchi told reporters after he met with Abe.