Newspaper article The Daily Yomiuri (Toyko, Japan)

Govt, BOJ Coming to Terms: Set to Finalize Documents for Monetary Policy Accord

Newspaper article The Daily Yomiuri (Toyko, Japan)

Govt, BOJ Coming to Terms: Set to Finalize Documents for Monetary Policy Accord

Article excerpt

The government and the Bank of Japan are finalizing adjustments on a de facto policy accord document based on discussions at Wednesday's meeting of the Council on Economic and Fiscal Policy.

The central bank's ability to maintain its independence from the government will be a key factor in discussions on the 2-percent inflation target pursued by Prime Minister Shinzo Abe.

Additionally, the BOJ's potential implementation of further monetary easing to curb deflation will be another focal point of discussions during its monetary policy meeting Jan. 21-22. The government and the central bank are set to sign a written agreement during the meeting.

Avoid specific deadline

The BOJ is expected to designate desirable price levels during the Jan. 22 meeting in line with Abe's intended 2 percent inflation target.

The central bank had already presented target price levels as a benchmark and said the year-on-year increase in the consumer price index should be 1 percent for the time being.

However, the BOJ is expected to change its benchmark into a "target" in the accord, and raise the figure to about 2 percent.

Nevertheless, observers also believe the central bank is hoping to set a flexible target, perhaps by using vague expressions such as "a level less than but close to 2 percent," similar to the wording used by the European Central Bank.

Further discussion will be required to set a time frame for achieving the target.

Efforts by the government and central bank to achieve the goal are likely to intensify once the time frame is set.

However, it has been suggested that setting a short time frame may lead to excessive monetary easing, resulting in volatility in the economy.

Therefore, Akira Amari, minister in charge of economic revitalization, said the government is not considering a specific date as a deadline for the target. Phrasing such as "in the medium and/or long term" is expected to be used instead.

BOJ's accountability

The central bank's accountability for the success or failure of its actions is expected to also feature in discussions. …

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