BoJ board member at odds with Kuroda

A Bank of Japan board member has attacked bank governor nominee Haruhiko Kuroda's inflation target.

Story highlights

  • A Bank of Japan board member complains new inflation target is "very high"
  • Koji Ishida's stance is counter to Haruhiko Kuroda, the bank governor nominee
  • Prime Minister Shinzo Abe pressured the BoJ to raise its inflation target

Koji Ishida, a board member at the Bank of Japan, has described the bank's 2 per cent inflation target as "very high", in a sign of possible friction with the stance of Haruhiko Kuroda, the government's pick for the next central bank governor.

In a speech on Monday to business leaders in Utsunomiya, a city 100km north of Tokyo, Mr Ishida said the 2 per cent level was attainable only "if a wide range of players make progress in boosting the competitiveness and growth potential of the Japanese economy, along with powerful monetary easing".

Such views are consistent with those of the outgoing BoJ governor, Masaaki Shirakawa, who twice pushed for formal declarations from politicians that ending deflation is a joint endeavour between the BoJ and the government.

Mr Ishida also echoed Mr Shirakawa by noting that Japan had not seen a consistent 2 per cent rate of inflation for more than 20 years.

However, the remarks jar with those of Mr Kuroda, president of the Manila-based Asian Development Bank. At a parliamentary hearing on Monday, Mr Kuroda reiterated his belief that the BoJ alone had the power to overturn Japan's persistent state of mild deflation, criticising its current easing as "insufficient".

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Bold moves from the Bank of Japan
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The BoJ's introduction in January of the 2 per cent target -- under firm pressure from returning prime minister Shinzo Abe -- was "epoch-making", he said, adding that fulfilling it was "the biggest mission for the BoJ governor".

The split in opinion is the strongest indication yet that some policy makers on the BoJ's nine-strong board may push back against the urgings of Mr Kuroda, whose nomination to succeed Mr Shirakawa is widely expected to be approved by both houses of parliament this week.

At last week's BoJ policy meeting -- the last under Mr Shirakawa -- the board voted emphatically against proposals from two members to increase the pace and the scale of the bank's current easing programme, under which it expects to achieve a 0.9 per cent rise in prices within the next two fiscal years.

Despite the reservations aired on Monday, Mr Ishida is considered one of the more dovish members of the board. In December he proposed cutting the rate of interest that the BoJ pays on overnight reserves from 0.1 basis points to zero, partly as a way of weakening the exchange rate.

The other eight board members rejected the proposal, arguing that money-market functions could be impaired by doing so, effectively tightening monetary conditions.

Mr Ishida, 65, had a 41-year career in banking, mostly with Sumitomo Bank, before joining the BoJ's policy board in 2011.

Mr Shirakawa and his two deputy governors will stand down from the BoJ on March 19.

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