March 20, 2019 / 8:20 AM / 3 months ago

Abe describes BOJ's inflation goal as means to spur growth

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe said on Wednesday he sees the central bank’s inflation target as a means to achieve the more important goal of reviving the economy, in a sign that firing up inflation may no longer be a priority for the government.

FILE PHOTO: Japan's Prime Minister Shinzo Abe speaks to media after phone talks with U.S. President Donald Trump (not pictured) after second North Korea-U.S. summit, at Abe's residence in Tokyo, Japan February 28, 2019. REUTERS/Issei Kato

The premier’s comments followed those from Finance Minister Taro Aso, who warned the Bank of Japan last week against insisting on hitting its price goal.

Abe defended the BOJ for missing its 2 percent inflation target, telling parliament that the government gives a passing grade to its policies for boosting jobs and economic growth.

“The BOJ’s price target is not only a target but a means to revive the economy,” Abe told parliament, adding the priority for many central banks across the globe, including the BOJ, was to spur growth and create more jobs.

“With monetary policy, you can create jobs and put an end to deflation. In doing so, you need an inflation target of 2 percent,” Abe said.

“In achieving our fundamental goal of spurring growth, (the BOJ’s policies) have had a sufficient effect,” he said.

Abe’s views contrast with remarks by BOJ Governor Haruhiko Kuroda, who have consistently said achieving the bank’s price target was its priority.

Speaking at the same parliament committee, Kuroda said the central bank was ready to ramp up stimulus if the economy loses momentum for hitting his price target.

With inflation distant from its target, the BOJ is struggling to balance the need to drive up inflation and address the rising cost of prolonged easing such as the hit to bank profits from years of ultra-low interest rates.

As heightening overseas risks such as trade protectionism threaten Japan’s fragile economic recovery, BOJ policymakers disagreed on the next policy move at their January rate review, according to minutes of the meeting released on Wednesday.

Abe reiterated that the government hopes the BOJ keeps up efforts to achieve its inflation target, with an eye on economic, price and financial developments.

The premier said there was no inconsistency between his views and those of Aso, who said last week that “things could go wrong” if the BOJ insisted too much on achieving its price goal.

Reporting by Leika Kihara; Editing by Kim Coghill

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