Shirakawa Pushes Back With Criticism of Abe Unlimited Easing

Bank of Japan Governor Masaaki Shirakawa pushed back against pressure on the central bank, criticizing the unlimited easing advocated by opposition leader Shinzo Abe and urging respect for the BOJ’s independence.

“I want respect for the BOJ’s independence as it’s doing its utmost to conduct appropriate monetary policy,” Shirakawa told reporters in Tokyo today.

Without naming Abe, Shirakawa said that unlimited money-printing could worsen the national debt and that a 3 percent inflation goal, also suggested by the opposition leader, would be unrealistic. A shrinking economy and an election on Dec. 16 are encouraging politicians to press the central bank for more aggressive action to spur growth and counter deflation.

“These kind of comments from Shirakawa are rare, and were aimed at Abe,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former central bank official. “He wants politicians to respect what the BOJ has done and tone down the pressure.”

Abe, head of the Liberal Democratic Party that is leading in polls to win next month’s vote, helped drive the yen to a seven-month low yesterday by fueling speculation that more easing is likely. The government taking office after the election will have extra room to reshape policy by choosing the central bank’s top three officials.

“The best option is to have an inflation target,” Abe told reporters in Tokyo today. “Whether 2 percent is better or 3 percent is better should be left for the experts to discuss.”

Shirakawa Leaving

Shirakawa, criticized by politicians for his perceived failure to reverse more than a decade of deflation, ends a five-year term on April 8. His deputies Hirohide Yamaguchi and Kiyohiko Nishimura exit in March. Central bank policy makers refrained from easing today after a two-day meeting, as the government announced 1 trillion yen ($12 billion) of spending to support growth.

The yen rose as much as 0.3 percent to 81.14 per dollar following today’s decision, after touching 81.59 yesterday, its lowest since April 25 as Abe’s comments drove speculation on the prospects of more easing. The currency traded at 81.23 as of 5:37 p.m. in Tokyo.

Abe said on Nov. 17 that he may ask the BOJ to buy construction bonds to support government spending and would choose someone in favor of inflation targets as Shirakawa’s successor, Kyodo News reported.

Directly buying government debt “is on the top list of taboos when the International Monetary Fund advises developing nations on their central bank systems,” Shirakawa said at today’s press conference. “No developed nations are doing it.”