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2012年11月23日 (金)

金融政策 デフレ脱却の具体策で競え

The Yomiuri Shimbun (Nov. 23, 2012)
Parties must show concrete steps for conquering deflation
金融政策 デフレ脱却の具体策で競え(11月22日付・読売社説)

How to conquer deflation will be a major campaign issue for the looming House of Representatives election. Before parties even begin exchanging verbal blows on this issue, Liberal Democratic Party President Shinzo Abe's recent remarks have caused a stir.

At a lecture meeting held Saturday in Kumamoto, Abe said if his party comes to power, he would ask the Bank of Japan to conduct unlimited monetary easing measures. Abe also touched on government bonds issued for public works projects--so-called construction bonds--saying he would "eventually ask the central bank to buy them all."

Abe's remarks drew heavy criticism from various quarters, including the government. "Asking the Bank of Japan to directly buy government bonds is an impermissible step," Prime Minister Yoshihiko Noda said.

The Bank of Japan can issue paper currency limitlessly if it wishes to do so. Thus problems will arise if Abe actually demands the central bank directly buy government bonds. This could lead to the unlimited issuance of government bonds, just like what happened during World War II. Eventually, fiscal discipline will collapse, unleashing hyperinflation.

However, during the Kumamoto lecture, Abe said he will ask the bank to buy construction bonds through open market operations, which is a typical monetary control measure conducted by the central bank. At a press conference Wednesday, Abe said, "I've never talked about asking [the Bank of Japan] to buy bonds directly."

Even so, we have a nagging concern that the LDP, if it returns to power, might ask the central bank to cover the government's deficits. We want Abe to explain his intentions more specifically.


Japan needs bold policies

The problem stems from the failure of past administrations to beat deflation and rectify the extreme appreciation of the yen. No matter which party wins next month's election, the government needs to implement drastic monetary and financial steps that go beyond conventional thinking.

Japan's inflation rate has been hovering around zero for years. The nation's nominal gross domestic product has dropped by more than 30 trillion yen from five years ago. The central bank has been conducting monetary easing measures aimed at lifting prices by 1 percent annually, but they have produced few tangible results.

Markets reacted positively to Abe's remarks. Stock prices rose and the yen fell. This shows the market has high expectations for government monetary measures to be conducted after the election.

Political parties should show their concrete plans for defeating deflation and actively debate this topic in the election campaign.


Risk of excessive intervention

On Wednesday, the LDP announced its election campaign platform, which contained monetary policies bolder than measures taken by the current administration, such as setting an annual inflation target of 2 percent. Setting the inflation target was aimed at making both the government and the central bank responsible for achieving the goal. We can see the point of this plan.

The LDP also stated in its platform it will strengthen government cooperation with the central bank and implement bold monetary easing measures. These measures are also appropriate.

However, we are uncomfortable with the party's suggestion it might revise the Bank of Japan Law if it takes power. Some LDP members even plan to give the government the power to dismiss the bank governor.

The central bank's independence will be undermined if the government forces it to implement policies by waving around threats to sack the governor. The government should resist foolishly throwing the markets and the economy into chaos by excessively intervening in the bank's policies.

(From The Yomiuri Shimbun, Nov. 22, 2012)
(2012年11月22日01時14分  読売新聞)


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