Jean-Claude Trichet, the former European Central Bank president, said he sees limits on the role Japan’s central bank can play in driving a growth revival.
“What counts are structural reforms,” and the Bank of Japan can’t shoulder too much responsibility, Trichet said in a Bloomberg Television interview at the Credit Suisse Asian Investment Conference in Hong Kong today. “The problem with Japan in my opinion is really demographics. Demographics are a big, big, big problem.”
Japan’s new central bank Governor Haruhiko Kuroda, who officially starts in the role today, has pledged more-aggressive monetary stimulus to spur growth and end entrenched deflation in the world’s third-biggest economy. He faces obstacles including an aging population, an elevated reliance on energy imports because of nuclear-plant shutdowns and restrictions on labor-market flexibility.
Trichet said he has “a lot of respect” for Kuroda’s predecessor, Masaaki Shirakawa, who ended his tenure by reasserting that boosting the supply of money won’t be enough to end deflation. Trichet, 70, headed the ECB from 2003 to 2011 and was succeeded by Mario Draghi, who last July pledged to do “whatever it takes” to defend the euro. Kuroda has made a similar vow to counter Japan’s deflation.
The yen is down about 9 percent this year against the dollar, largely because of Prime Minister Shinzo Abe’s pledges for monetary easing. The currency traded at 95 per dollar as of 11:28 a.m. in Tokyo. Japan’s stock market is closed today for a holiday.
“There is no link between the monetary base and growth in consumer prices,” Shirakawa said yesterday in his final press conference in Tokyo. “Monetary policy of course has a role, but it’s necessary for a wide range of institutions to make efforts to boost competitiveness and growth potential.”
Kuroda said last week he wants to look at additional stimulus “soon,” and academic Kikuo Iwata, taking one of the two deputy governor positions, has pushed for expanding the supply of money in the economy.