Wed, Jan 23, 2013 - Page 15 News List

Under-pressure BOJ sets new target for inflation

‘EPOCH-MAKING’:Abe was more excited by the move than investors, with the Nikkei falling 0.35% after the market was disappointed that easing was delayed until next year

AFP, TOKYO and HONG KONG

The BOJ said it changed its previous inflation “goal” to a more explicit “target” due to the “increasing awareness regarding the importance of flexibility in the conduct of monetary policy in Japan.”

However, the move was likely to be viewed as the BOJ falling into line with government demands, but it may still fall short of satisfying Japan’s prime minister.

Two members of the policy board voted against the new inflation target demanded by Abe, the bank said.

“The Bank of Japan at least offered a gesture to work together with the government to tackle deflation, mainly by adjusting its rhetoric,” Dai-ichi Life Research Institute chief economist Yoshikiyo Shimamine said.

However, “the government is likely to step up pressure on the BOJ and this will also be reflected in Abe’s nomination for a new bank governor,” Shimamine said.

On Monday, Germany’s central bank chief, Deutsche Bundesbank President Jens Weidmann, lashed out at what he called government meddling in the affairs of central banks in industrialized nations, such as Japan and Hungary.

“We are witnessing disturbing abuses ... where the new government is interfering massively in the affairs of the central bank, calling forcefully for a more aggressive monetary policy,” he said.

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