Japanese Cabinet ministers increased pressure on the Bank of Japan (BOJ) yesterday to respond to deflation, with one saying that the central bank was asleep at the wheel.
The government last week declared the country had entered its second bout of deflation in less than a decade as a public battle brews between the administration and the BOJ over how to manage the economy.
Each says the other should play a greater role in battling deflation, which is forecast to dog the economy for several years, raising fears of another recession. Economists, however, say options are limited for both.
PHOTO: REUTERS
The government has accused the BOJ of having too rosy a view on the economic outlook, and Japanese banking minister Shizuka Kamei, a strident critic of the central bank, kept up the attack yesterday.
“The situation is serious,” said Kamei, leader of a small political party in the government coalition.
“The Bank of Japan is asleep at the wheel as usual,” he told reporters after a Cabinet meeting. “Because the BOJ is independent, we can’t simply lash out and wake it up. In that context, the government’s role is very important.”
For the government’s part, having the worst public debt burden among industrialized countries at about 170 percent of GDP leaves it little leeway to splash out on stimulus to keep the economy growing.
The BOJ may face pressure to increase its purchases of government debt — pumping more cash into the economy — but economists say that may not do much to close a large gap between supply and demand that is weighing on consumer prices.
Two government representatives, one from the Cabinet Office and another from the finance ministry, attend BOJ policy meetings. They cannot vote but can request delays in policy decisions.
“Monetary policy is principally responsible for price trends,” Finance Minister Hirohisa Fujii told reporters after a Cabinet meeting yesterday. “Fiscal policy cannot be the main tool to make up for Japan’s lack of demand.”
The government will maintain close contact with the BOJ, said National Strategy Minister Naoto Kan, who is also deputy prime minister.
The BOJ on Friday upgraded its assessment of the economy despite grumbling from the government, which on the same day declared Japan’s economy was experiencing mild deflation.
In the hope of diffusing some of the tension with the government, the BOJ renewed its pledge to maintain very easy monetary conditions by keeping its interest rates near zero.
Central bank Governor Masaaki Shirakawa said on Friday that falling demand was the root cause of deflation and that the BOJ would make sure consumer and corporate spending aren’t curtailed by monetary reasons, suggesting that fiscal spending must also play a role.
“The new government is shifting spending to welfare from infrastructure, but that will take time to have an impact,” said Simon Wong, regional economist at Standard Chartered in Hong Kong. “At some point the BOJ will have to increase its purchases of Japanese government bonds, because if you have deflation on one hand and rising yields on the other, you will have rising real interest rates and that will hurt the recovery.”
MORE VISITORS: The Tourism Administration said that it is seeing positive prospects in its efforts to expand the tourism market in North America and Europe Taiwan has been ranked as the cheapest place in the world to travel to this year, based on a list recommended by NerdWallet. The San Francisco-based personal finance company said that Taiwan topped the list of 16 nations it chose for budget travelers because US tourists do not need visas and travelers can easily have a good meal for less than US$10. A bus ride in Taipei costs just under US$0.50, while subway rides start at US$0.60, the firm said, adding that public transportation in Taiwan is easy to navigate. The firm also called Taiwan a “food lover’s paradise,” citing inexpensive breakfast stalls
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
CROSS-STRAIT: The vast majority of Taiwanese support maintaining the ‘status quo,’ while concern is rising about Beijing’s influence operations More than eight out of 10 Taiwanese reject Beijing’s “one country, two systems” framework for cross-strait relations, according to a survey released by the Mainland Affairs Council (MAC) on Thursday. The MAC’s latest quarterly survey found that 84.4 percent of respondents opposed Beijing’s “one country, two systems” formula for handling cross-strait relations — a figure consistent with past polling. Over the past three years, opposition to the framework has remained high, ranging from a low of 83.6 percent in April 2023 to a peak of 89.6 percent in April last year. In the most recent poll, 82.5 percent also rejected China’s
PLUGGING HOLES: The amendments would bring the legislation in line with systems found in other countries such as Japan and the US, Legislator Chen Kuan-ting said Democratic Progressive Party (DPP) Legislator Chen Kuan-ting (陳冠廷) has proposed amending national security legislation amid a spate of espionage cases. Potential gaps in security vetting procedures for personnel with access to sensitive information prompted him to propose the amendments, which would introduce changes to Article 14 of the Classified National Security Information Protection Act (國家機密保護法), Chen said yesterday. The proposal, which aims to enhance interagency vetting procedures and reduce the risk of classified information leaks, would establish a comprehensive security clearance system in Taiwan, he said. The amendment would require character and loyalty checks for civil servants and intelligence personnel prior to
RSS