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Reuters file photo Banknotes of Japanese yen are seen in this illustration picture taken in 2022.
Jiji Press
12:21 JST, January 22, 2023
TOKYO (Jiji Press) — Japanese government and central bank officials are expected to step up discussions on the handling of a 2013 joint statement that commits the two sides into working together to overcome deflation.
Some are calling for revising the statement as the Bank of Japan has not yet achieved its 2% inflation target, a goal spelled out in the document.
The statement was issued in January 2013 by the administration of then Prime Minister Shinzo Abe and the BOJ, led by then Governor Masaaki Shirakawa.
At the time, the BOJ was under pressure from lawmakers to act more aggressively to get the country out of deflation.
“The most important part of the statement is that the government and the central bank need to share the goal of ending deflation,” Akira Amari, who was economic and fiscal policy minister at the time, said in an interview.
The BOJ launched its massive monetary easing campaign, including hefty purchases of government bonds, in an effort to achieve 2% inflation at an early date, after Haruhiko Kuroda became its governor in March 2013.
Initially, the campaign led stock prices higher and helped improve corporate earnings by guiding the yen lower. But the BOJ says the inflation goal remains unattained.
The country’s core consumer price index, excluding often volatile fresh food prices, rose 4.0% in December from a year before. On Wednesday, the BOJ raised its CPI growth forecast for fiscal 2022, which ends in March, to 3.0% from a projection of 2.9 pct in October.
At a press conference after the forecast was released, Kuroda said, “It’s regrettable that (the country) is not in a situation in which the price target can be attained in a sustainable way.”
Prime Minister Fumio Kishida plans to meet with a successor to Kuroda to discuss how the government and the BOJ should cooperate. Kuroda’s term as BOJ governor ends in April. The handling of the 2013 statement is expected to be the focus of talks.
Some are cautious about revising the statement.
“There is no need to revise the statement yet,” Amari said, pointing to a risk that deflation may come back unless the pace of wage increases surpasses that of price hikes after the inflation target is achieved.
“I’m worried that we may send wrong messages to markets and others if we revise the statement at this point,” he said.
Meanwhile, a BOJ official said there is room for discussion on changing the statement partially, such as by reviewing the wording that the central bank aims to achieve the inflation target “at the earliest possible time.”
At a meeting of the government’s Council on Economic and Fiscal Policy in December, Mana Nakazora of BNP Paribas Securities (Japan) Ltd., called for a review of the statement.
While noting that the government and the BOJ largely share the same goals, Nakazora said in an interview, “We need to start from the point of whether the statement is necessary in the first place.”
She said that a joint statement between the government and the BOJ should clarify “how they will normalize monetary policy and minimize the impact of the process on markets.”
“It’s true that massive monetary easing worked under the joint statement. I think, however, that there were side effects, such as raising suspicions that the BOJ may not have been able to act freely,” she said.
In a radio program aired on Jan. 3, Kishida said he would hold talks with Kuroda’s successor to discuss “how to proceed with policies under what arrangements.”
