politics

Abe says BOJ must set 2% medium-term inflation goal

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Good move - it's what I would like to see from a Japanese PM. The BOJ needs reform and with the end of Shirakawa's term they will look to appoint a bolder govenor.

Their overall objective is for 3% inflation. If they can do this with a combination of stimulus, monetory policy reform and taxation reform, Japan's debt and economic situation starts to look very different.

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There are still fundermental problems but its a step in the right direction. These packages didnt go far last time when the benifisheries went OS or funds went in to Hongkong casinos. There is certinaly a lot if infrustructure that needs upgrading but I have little faith the money will end up in the pockets of the ground based spenders that keep the economie rolling rather than the present childless wealthy that will add to their OS property and share portfolio The contires brains and entrepeners left years ago to live in sunny somewhere while the current generation are still playing soldiers from 9 to 10 pm 6 days. With no possibility of increasing the population.

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Abe, leave the BOJ to do its duty free from political interference.**

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I am not sure whether Mr. Abe should be telling the Bank of Japan what to do, let alone threaten this Japanese institution with bringing to an end its independence from government meddling if it does not comply. The BOJ is comprised of very capable and well versed members in economic matters. They are always studying the progress of the economy of Japan in relation to evolving international markets so it should be left up to the BOJ to establish the interest rates at which money is borrowed to promote the creation of wealth. Also, Japan can-- unlike the members of the euro zone-- establish how and when to devalue the yen to ease exports by a country whose economy depends so heavily on it. Otherwise, you run the risk of taking away from the BOJ the power to take decisions based solely on economic needs against political interests which has been catastrophic to some euro zone members like Spain. The Bank of Spain has no say in the interest rates at which people borrow nor has it any power anymore to devalue its currency-- the euro-- with the dismal effects we all know. Mr. Abe: Leave the BOJ get on with it.

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An important question is whether this inflation will result in higher wages. Or will we just see prices rise, the yen weaken and wages still dropping from the supply pressures of a global labour market. In this case people will have even less purchasing power. I guess another important question is which groups of LDP friends will benefit?

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If the economy was pumped with printed money, more money are circulating. It will cause inflation will be higher. If imported goods will be more expensive due to low yen, employed people will demand higher wages. It will cause higher inflation too. If there is more employment opportunities, consumers will spend more with confidence. If the people spend more, inflation will be higher too. 2% inflation is reasonable for short term. However medium and long term is very challenging.

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