Japan Mulling BOJ Accord Linked to Employment, Mainichi Says

The Japanese government and the Bank of Japan are discussing a policy accord aimed at achieving stable employment conditions, the Mainichi newspaper reported.

The agreement won’t define any specific policies to be followed by the central bank and won’t set a timeframe for achieving a 2 percent inflation goal sought by Prime Minister Shinzo Abe, the Mainichi reported today, without citing anyone and without giving any further details.

While Federal Reserve officials are debating how soon to end their cash infusions, Japan’s central bank is under pressure from Abe to do more to end deflation and boost growth. The yen has weakened around 8 percent since mid-November as Abe has called for unlimited liquidity, with the currency sliding through 88 per dollar in Tokyo last week for the first time since July 2010.

“It would be hard for the BOJ to influence the unemployment rate through monetary policy, especially when the economy is mired in deflation,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. and a former BOJ official. “Japan’s labor market problems are about a mismatch of demand and supply, and it would be complicated for the BOJ to improve that.”

When asked about the report at a press briefing in Tokyo today, Finance Minister Taro Aso said that the BOJ shouldn’t have sole responsibility for improving employment conditions.

The result of the government’s discussions with the BOJ will be announced at the central bank’s meeting on Jan. 21-22, the Mainichi said.

A BOJ spokesman declined to comment on the report.

Last month, the Fed linked the outlook for its main interest rate to unemployment, saying rates will stay low “at least as long” as the U.S. jobless rate remains above 6.5 percent.

Japan’s unemployment rate fell to a four-year low of 4.1 percent in November, the government said last month.

BOJ Governor Masaaki Shirakawa’s board pledged last month to review its inflation goal of 1 percent after Abe called for the target to be doubled.

The yen appreciated 0.5 percent to 87.35 per dollar as of 3:35 p.m. in Tokyo.

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