Japanese Prime Minister Yoshihiko Noda said yesterday that the opposition’s call for radical monetary easing to beat chronic deflation was “dangerous” and defended the independence of the central bank, countering arguments by the front-runner in next month’s election.
Noda and the leader of the Liberal Democratic Party (LDP), Shinzo Abe, differed sharply over monetary and foreign policy in separate television appearances ahead of the Dec. 16 election, which the opposition party is tipped to win in opinion polls.
Abe reiterated his call for setting a 2 percent inflation target, which is double the current goal of the Bank of Japan (BOJ), to pull the world’s third-largest economy out of a long spell of deflation.
The LDP leader also called for revising the law governing the BOJ so that the central bank is held responsible not only for price stability, but also for job creation and the health of the real economy.
He said the BOJ must buy construction bonds from the market to finance infrastructure spending to rev up the economy, which is sliding into a recession.
“It is a dangerous way of thinking,” Noda said in a TV Asahi program. “It would undermine the central bank’s independence if the government lays out the objective of monetary policy and mentions specific methods.”
“It would be too complacent to think that the economy will improve by printing money,” Noda added.
The two leaders also differed on foreign policy, especially the LDP’s proposal to post public servants on a permanent basis on islands at the center of a territorial row with Taiwan and China to boost Tokyo’s effective control.
“Putting personnel there at this time could cause further escalation of tensions. The bilateral relationship [with China] would be jeopardized if we don’t have a severe view of the current circumstances,” Noda said.
Japan-China ties worsened sharply after the Japanese government in September bought three of the disputed Diaoyutai Islands (釣魚台) — known as the Senkaku Islands in Japan — hurting bilateral trade and investment.
“Our beautiful oceans are being threatened as Chinese ships are entering our territorial waters one after another,” Abe said. “Would it be a positive message if we said, just like Prime Minister Noda does, that we would give them special considerations?”