ECB’s Weidmann Says Bank of Japan’s Independence Under Threat
Bundesbank President Jens Weidmann said the Bank of Japan’s independence is under threat and warned that government interference in monetary policy could start to impact on exchange rates.
“Already, alarming attacks can be seen, for example in Hungary or in Japan, where the new government is interfering massively in the affairs of the central bank, pressuring for a yet more aggressive monetary policy that’s threatening the end of central bank autonomy,” Weidmann, who also sits on the European Central Bank’s Governing Council, said in a speech in Frankfurt last night. “A consequence, whether intended or not, could be the increasing politicization of the exchange rate.”
The Bank of Japan earlier today set a 2 percent inflation target and said it will shift to Federal Reserve-style open- ended asset purchases next year in a bid to end two decades of deflation. The move comes after new Prime Minister Shinzo Abe, who is due to choose a successor for BOJ Governor Masaaki Shirakawa in April, pushed for looser monetary policy and a weaker yen.
“Until now, the international monetary system has come through the crisis without rounds of competitive devaluations,” Weidmann said. “I very much hope it stays that way.”
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