Abe Clashes With New Opposition Leader Over BOJ Inflation Policyby and
Renho calls monetary policy a ‘failure,’ criticizes GPIF
Abe says will work with BOJ, cites improvement in employment
Japanese Prime Minister Shinzo Abe locked horns with new opposition leader Renho over Bank of Japan policy and his economic program Wednesday, in their first parliamentary standoff since she won a party election two weeks ago.
Renho, the leader of the main opposition Democratic Party, described the new framework from the central bank on Sept. 21 as an admission that the limits of monetary policy were being reached. She criticized Abe’s “three arrow" program of monetary, fiscal and reform policies.
"The goal of reaching two percent inflation in two years has been abandoned," Renho, who goes by a single name, told lawmakers. “This is nothing other than an acknowledgment of failure for the first arrow."
Abe said he would continue to work closely with the central bank, and that its policy was aimed at reaching the price target as soon as possible. In response to Renho’s call for a review of the government’s economic program, Abe said: "We have been able to create a situation that is not deflation. In particular, employment has improved markedly and this is extremely important for the lives of the people."
‘Distorting the Markets’
The BOJ this month shifted the focus of its monetary stimulus from expanding the money supply to controlling interest rates. The move was aimed at helping manage the impact of its asset purchases and negative interest rates on Japanese banks, which have seen profits hurt by a narrowing of short-term and long-term yields.
Renho was previously best known for her efforts to cut wasteful spending while her party’s predecessor, the Democratic Party of Japan, was in government from 2009 to 2012. Her criticism of the BOJ mirrors that of some economists who said the shift in policy was a tacit admission that it has reached the limits of its Japanese government bond purchases.
Renho added that the massive Government Pension Investment Fund, known as GPIF, was "distorting the markets" through its investments and urged the government to switch to less risky assets to assuage public concern. Abe said GPIF had secured sufficient profits and that allegations of market distortion were untrue.
With new leadership, the Democrats are seeking to eat into Abe’s support, which held at a relatively strong 58 percent in a poll published by the Nikkei newspaper this week. Fifty-one percent of respondents said they had positive expectations for Renho.