Abe Shift on BOJ Shows Volcker Moment May Loom in Japan: Economy

Japan’s incoming Prime Minister Shinzo Abe backed the central bank when it raised interest rates in 2006, a move he now says was a mistake. His shift may signal less tolerance for deflation in the third-largest economy.

Abe, whose party swept to victory in elections for the lower house of Parliament two days ago, will have the chance to reshape the Bank of Japan next year, when the terms of its governor and two deputies expire. Abe said he told central bank Governor Masaaki Shirakawa today that he wants an accord with a 2 percent inflation target. The BOJ is forecast to boost its asset purchases as soon as Dec. 20.