Kishida’s New Government Confirms 2% Price Goal With BOJ
(Bloomberg) -- Japan’s new government and the central bank confirmed their commitment to a key 2013 pledge to cooperate on achieving 2% inflation, a move that will likely temper market speculation of an early stimulus exit.
Bank of Japan Governor Haruhiko Kuroda reaffirmed the commitment in a meeting with government ministers Tuesday, the BOJ said in a release after Kuroda met with Finance Minister Shunichi Suzuki and Economy Minister Daishiro Yamagiwa.
The three-way meeting between the ministers and the central bank governor was the first since Sunday’s election. It indicates that Prime Minister Fumio Kishida is keen to reassure investors, policy makers and analysts that there will be no immediate shakeup of economic policy as the government focuses on shoring up a feeble pandemic recovery.
“They wanted to send a message from early on that the economy is Kishida’s focal point,” said Eiji Kitada, chief economist at Hamagin Research Institute. He described the meeting as a ceremony to reduce speculation and show that while the faces have changed, policy hasn’t.
“The government won’t say it but the BOJ’s easing is critical as it keeps borrowing costs extremely low when issuing bonds,” Kitada said.
The BOJ’s yield curve control keeps long-term yield rates around zero, a useful outcome for a government that has the highest public debt load in the industrialized world. The government has pledged to compile a large economic package this month.
While Kishida has said he is inheriting the policies championed by former Prime Minister Shinzo Abe, the new premier has shown no intention of pushing the BOJ into additional easing to achieve its inflation goal. Abenomics focuses on monetary easing, flexible fiscal policy and reforms to achieve stable growth.
Consumer prices excluding fresh food finally rose above zero for the first time in 18 months in September. That underscored how far the central bank stands from its target and the divergence with its global peers looking to normalize policy.
The BOJ and the predecessors of Suzuki and Yamagiwa compiled a joint statement in 2013, stating Japan’s 2% inflation target for the first time. Kuroda has repeatedly cited it as a reason for his resolve to achieve the target.
When former vaccine minister Taro Kono was seen as a favorite to become prime minister in September, there was growing market speculation that the statement might be revised due to Kono’s past comments suggesting the need for a cautious approach on monetary easing.
Last month Yamagiwa said there was no need to change the joint statement, already signaling there’s no intention within the Kishida cabinet to shake up things drastically.
“The most important thing was to reconfirm we will maintain the joint statement and we did that,” Yamagiwa told reporters after the meeting.
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