Japan PM Abe says BOJ’s easy policy shouldn’t continue forever
Japanese Prime Minister Shinzo Abe said on Friday the central bank’s ultra-easy policy should not continue forever, signaling his hope of laying the path toward an exit from a radical stimulus programme in coming years.
Abe said the Bank of Japan’s 2 percent inflation target was only one measurement in guiding policy, suggesting that the central bank should not persist in meeting the goal at all cost.
The remarks are the clearest sign to date that Abe’s administration is taking a more relaxed approach toward hitting the price target than before, and becoming more amenable to the idea of a gradual withdrawal of crisis-mode monetary stimulus.
Abe said the BOJ’s massive stimulus programme, which was part of his signature “Abenomics” policies to reflate the economy, was needed to pull Japan out of chronic deflation.
But he said economic conditions have improved with the job market near full employment and growth strengthening.
“I don’t think we should do (the ultra-loose policy) forever,” Abe told a news conference, when asked whether the BOJ needs an exit strategy for its massive stimulus programme.
“But when to modify the easy policy is up to (BOJ Governor Haruhiko) Kuroda. I’ve left that decision to him,” Abe said.
Abe made the remarks ahead of a ruling party leadership race next week, which he looks set to win and would put him on track to become Japan’s longest-serving premier.
Economists polled by Reuters gave Abe middling marks on his economic accomplishments and projected the BOJ’s next move to be a withdrawal of stimulus.
“Wages are finally picking up … We’re starting to see consumption and capital expenditure boost growth,” Abe said.
“I’d like to achieve this during my next term,” he said, when asked whether he will lay the path toward an exit from the BOJ’s ultra-easy policy if he is re-elected.
The remarks from Abe, who had rarely spoken about the BOJ’s exit strategy, underscore a shift in the government’s approach on monetary policy.
“I think Abe took into account growing public doubts over the sustainability of the BOJ’s policy and criticism about its side-effects,” said Yusuke Ichikawa, senior economist at Mizuho Research Institute.
“That said, I don’t think Abe suggested the BOJ should end easy policy anytime soon … He is happy as long as interest rates remain low and help fund government borrowing costs.”
Abe picked Kuroda as BOJ governor, who deployed a sweeping stimulus programe in 2013 which helped reflate the economy but failed to fire up inflation to the bank’s target.
As years of heavy asset buying dry up market liquidity and ultra-low rates strain bank profits, the central bank has come under increasing criticism over the rising cost of prolonged easing.
Responding to such concerns, the BOJ took steps in July to make its policy framework sustainable such as allowing bond yields to move more flexibly around its zero-percent target.
“The BOJ’s price target is one measurement in guiding policy but the real goal is to boost growth and employment,” Abe said. “We’ve seen a significant improvement in job growth.”