Japan’s Kono Casts Doubt on Price Goal in Leadership Bid
(Bloomberg) -- Japan’s vaccine czar Taro Kono signaled the need for a change of thinking on economic policy and a long-standing 2% price target as he declared his candidacy to replace outgoing Prime Minister Yoshihide Suga.
“Inflation reaches a certain level as a result of economic growth,” he told reporters at a news conference Friday to announce his candidacy, hinting that trying to achieve the target in isolation was putting the cart before the horse. Reaching the target under current circumstances would be difficult, he said.
Kono added that he wanted to reorient economic strategy toward individuals and create a country where no one was left behind.
With his declaration Kono became the third lawmaker to officially stand in the Sept. 29 leadership vote for the Liberal Democratic Party. The election follows Suga’s decision not to run amid sagging public support. Due to the party’s parliamentary power, its leader is virtually assured of becoming premier.
Kono’s rivals for the party leadership are former Foreign Minister Fumio Kishida and former Internal Affairs Minister Sanae Takaichi, who is seeking to become the country’s first female premier.
Kishida and Takaichi have pledged extra spending to help the economy overcome the pandemic hit, as well as to maintain the existing 2% inflation target. Kono also said emergency spending that requires bond issuance couldn’t be avoided.
Kono said the ultra-easy monetary policy advocated by former Prime Minister Shinzo Abe had helped the corporate sector make good profits, but said that wasn’t enough to drive prosperity for all.
“Unfortunately this didn’t always spread to salaries,” Kono said, adding that he wanted employees to get a greater share of increased profits.
In an apparent bid to broaden his appeal, Kono partially backtracked on his opposition to nuclear power, saying it’s realistic to restart nuclear plants if safety can be confirmed as a part of moves to achieve the country’s climate goals. He added nuclear power would be phased out at some point and it didn’t make sense to build more plants.
Polls published earlier this week found Kono was the most popular option with the general public, a pressing concern because the new leader will face a national election by the end of November.
Reacting to Kono’s remarks on inflation, economists noted that he said monetary policy should still be left up to the Bank of Japan to some extent, a remark that suggests BOJ stimulus will continue to roll for the time being should Kono become leader. Kono has previously called on the central bank to chart out an exit strategy from its massive stimulus program.
“Given the strong headwinds from Covid, there is no choice but to continue with monetary easing and expansionary fiscal spending for now,” said Yasuhide Yajima, chief economist at NLI Research Institute. “Only after we are done with this crisis will these views matter and have implications for the BOJ.”
Still, Kono’s comments mark a clear difference in views on monetary policy between him, Kishida and the pro-stimulus Takaichi, Yajima added.
Here are some other highlights from his briefing:
- Vaccines significant element in moving economy forward
- Japan’s vaccine rollout to be among the best of Group of Seven countries by October
- Amount of emergency spending needs consideration and is yet to be decided
- Economy has 22 trillion yen shortfall between supply and demand
- Would build 5G network across whole country as part of efforts to fill shortfall
- Believes he has the support of Finance Minister Taro Aso
- Not thinking of cutting consumption tax at the moment
- Carbon neutrality is an urgent issue in transportation
- Want to push for diplomacy with nations that share the same values
- Emphasizes the importance of the imperial family and other Japanese traditions
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