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Govt, BOJ must sign new policy accord - panel proposal
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BOJ's policy conduct must be revamped - panel member Okina
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Influential bank executive says BOJ policy unsustainable
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Proposal comes ahead of BOJ leadership transition
(Adds Kuroda comments, details)
By Leika Kihara and Yoshifumi Takemoto
TOKYO, Jan 30 (Reuters) - A panel of academics and
business executives on Monday urged the Bank of Japan (BOJ) to
make its 2% inflation target a long-term goal instead of one
that must be met as soon as possible, in light of the rising
cost of prolonged monetary easing.
The re-defining of the price target must be made in a new
policy accord between the government and the central bank that
would replace the one crafted in 2013, the panel said.
In the proposal, the panel also called for the need to have
interest rates rise more in line with economic fundamentals, and
normalise Japan's bond market function.
"The way the BOJ conducts monetary policy must be revamped,"
Yuri Okina, a panel member who is considered as among candidates
to become the next BOJ deputy governor, told a news conference.
"By making 2% inflation a long-term goal, the BOJ can make
its monetary policy more flexible," she said.
With rising raw material costs pushing up inflation well
above its 2% target, the BOJ has seen its ultra-loose policy
come under attack by investors betting it will hike interest
rates when Governor Haruhiko Kuroda's second, five-year term
ends in April, and those of his two deputies in March.
Nobuyuki Hirano, former president of MUFG Bank and member of
the panel, said the BOJ's yield control policy has become
unsustainable, as it is causing big distortions in the yield
curve and making the bond market dysfunctional.
"Given such distortions, we must correct the BOJ's policy
into one that is more flexible," Hirano told the news
conference. "It's too dangerous to keep going this way."
In parliament on Monday, Kuroda reiterated the importance of
maintaining ultra-loose monetary policy.
"Uncertainty regarding Japan's economy is extremely high.
It's therefore important now to support the economy, and create
an environment where companies can raise wages," he said.
"Japan has yet to foresee inflation stably and sustainably
achieve our 2% inflation target, backed by wage hikes," Kuroda
said. "As such, we must maintain our 2% inflation target and our
ultra-loose monetary policy."
Under strong political pressure to beat deflation, the BOJ
signed a policy accord with the government in 2013 and committed
to achieving 2% inflation "at the earliest date possible."
With inflation exceeding the BOJ's target, critics say the
current accord has become outdated and is preventing the BOJ
from phasing out its massive stimulus programme.
Given recent public complaints over rising inflation, Prime
Minister Fumio Kishida, who will choose the next BOJ governor,
has signalled the chance of revising the policy accord under
Kuroda's successor.
The panel consisted of about 100 academics, business
executives and labour union officials, including those who are
members of key government councils.
Kishida delivered a speech at one of the panel's meetings in
October, a sign of the influence its proposals have on the
government's economic policy.
(Reporting by Leika Kihara and Yoshifumi Takemoto; Editing by
Gerry Doyle and Jacqueline Wong)
