Kuroda Says Onus on Lawmakers to Tackle Debt After Abe Tax DelayToru Fujioka and Masahiro Hidaka
Bank of Japan chief Haruhiko Kuroda is putting the onus on the government to strengthen its finances after Prime Minister Shinzo Abe postponed a sales-tax increase and set plans for more fiscal stimulus.
“It’s the responsibility of parliament and the government, not an issue for the central bank,” Kuroda said yesterday at a press conference. When asked how the delay would affect the growth and inflation outlook, he said: “There is no point giving my personal view.”
Kuroda’s emphasis on the need for fiscal discipline contrasts with Abe’s decision this week to pursue boosting growth before raising the levy. The remarks indicate frustration that Abe may not be following through on his side of a deal that the two struck last year under which the BOJ would stoke inflation while the government repaired its finances and fostered growth, said Hiromichi Shirakawa, an economist at Credit Suisse Group AG who used to work at the BOJ.
“Kuroda must feel like he’s on his own,” said Yasuhide Yajima, an economist at NLI Research Institute. “Ironically, he is helping the government pile up more debt with massive bond purchases. He must be starting to wonder if this is what he really intended to do.”
Abe this week called an early election in a bid to extend his term and salvage his Abenomics policies. He delayed for 18 months the increase in the tax to 10 percent, after a bump to 8 percent in April helped tip Japan into its fourth recession since 2008.
Postponing the increase risks Japan’s fiscal consolidation targets. The government aims to cut the primary balance deficit as a proportion of gross domestic product in the year starting next April to half the 2010 level and reach a surplus in 2020.
The central bank and government issued a joint statement in January 2013 pledging the BOJ would work toward achieving 2 percent inflation while the government was responsible for fiscal consolidation and a growth strategy.
“There will be yellow lights flashing on whether we can achieve our fiscal target next year” considering the need to compile an economic stimulus package, Economy Minister Akira Amari told reporters after Abe’s comments. “All I can say now is we will make our utmost efforts.”
The prime minister indicated his intention to continue with efforts to restore the government’s finances to health.
“There is no backing away from our commitment to fiscal consolidation,” Abe said. “We will keep our fiscal 2020 goal to achieve fiscal health. I am convinced that through that, there will be no loss of international trust.”