Bank of Japan Signals Onus Is Now on Abe Government, Shirai Saysby
The Bank of Japan is signaling that Prime Minister Shinzo Abe’s government needs to do more to help achieve 2 percent inflation and revive the economy, former BOJ board member Sayuri Shirai said.
Government stimulus, along with highly accommodative financial conditions, would support growth in the Japanese economy at a rate likely to be above its potential through March 2019, the central bank said on Tuesday in its quarterly outlook report.
The central bank’s message was that it is now up to Abe’s government to do more, according to Shirai, whose term on the BOJ policy board ended in March.
"The BOJ sent a signal that the BOJ has done everything they could and already achieved very accommodative monetary environment and it’s now time for the government to do something to increase aggregate demand,” Shirai, a Tokyo-based professor of economics at Keio University, said in an interview on Wednesday.
Many economists interpreted a BOJ policy shift in September as preparation for a sustained fight to generate inflation. Shirai said the central bank would maintain the status quo on policy unless the yen surges or economic data deteriorate.
Now the focus is turning to fiscal policy. The government approved a second supplementary budget that includes a 28 trillion yen ($269 billion) economic stimulus package.
Shirai spoke a day after the BOJ downgraded inflation forecasts and said consumer prices excluding fresh food would likely reach "around" its target of 2 percent around fiscal 2018. That would be after Governor Haruhiko Kuroda’s term ends in April 2018.
The bank maintained its forecasts for economic growth.