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Japan Opposition LDP’s Main Ally Cautions Abe on BOJ Pressure

Japan’s Liberal Democratic Party should tone down its pledges on inflation targeting and increased defense spending, the party's key ally said ahead of Dec. 16 parliamentary elections the LDP is forecast to win.

Natsuo Yamaguchi, head of the New Komeito Party, said he is against forcing the Bank of Japan (8301) to set an inflation target of 2 percent, something LDP leader Shinzo Abe has repeatedly called for. Abe’s party has pledged to consider changing the law governing the central back to achieve its objective, which Komeito opposes.

“If we oblige the Bank of Japan by law to reach a two percent inflation target, or to form an accord with the government, we may undermine its independence,” Yamaguchi said in an interview today. Coordination between the government and the BOJ can be achieved without changing the law, he said, adding that an inflation rate of 1-2 percent is desirable.

Polls show the LDP, the largest opposition party, is on track to return to power it lost in 2009 with an absolute majority in the Diet’s lower house. Abe, in line to become prime minister, has called for “unlimited” monetary easing to end more than a decade of falling prices.

The LDP’s platform also advocates increasing defense spending and strengthening control over islands at the heart of a territorial dispute with China that has damaged a $340 billion trade relationship between Asia’s biggest economies. Yamaguchi, whose party is backed by the pacifist Soka Gakkai Buddhist sect, said raising military outlays is a mistake.

Photographer: Noriyuki Aida/Bloomberg

New Komeito Party Leader Natsuo Yamaguchi. Close

New Komeito Party Leader Natsuo Yamaguchi.

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Photographer: Noriyuki Aida/Bloomberg

New Komeito Party Leader Natsuo Yamaguchi.

“We have so far kept defense spending at about 1 percent of gross domestic product,” he said. “Changing this drastically may cause unease and confusion both at home and abroad, so it is not desirable.”

DPJ Dissatisfaction

Support for Prime Minister Yoshihiko Noda’s Democratic Party of Japan has plummeted over dissatisfaction with its economic stewardship and the handling of last year’s record earthquake that sparked the Fukushima nuclear crisis.

The LDP and New Komeito, which have been allied for more than a decade, may win more than 300 of the 480 seats in this month’s race, while the DPJ may win fewer than 100, the Yomiuri newspaper predicted today. The paper polled 101,167 people on Dec. 4-5 and gave no margin of error.

Before Noda dissolved parliament last month, the DPJ had 230 seats in the lower house, while the LDP had 118 seats and New Komeito had 21.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

Photographer: Noriyuki Aida/Bloomberg

New Komeito Party Leader Natsuo Yamaguchi. Close

New Komeito Party Leader Natsuo Yamaguchi.

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Photographer: Noriyuki Aida/Bloomberg

New Komeito Party Leader Natsuo Yamaguchi.

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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