The leader of Japan’s main opposition, seen as likely to become premier after a general election next month, called on the central bank to push interest rates to zero or below zero to spur lending, prompting the yen to slide to a six-month low.
The remark was the latest in a string of calls by Shinzo Abe, a former prime minister and head of the Liberal Democratic
Party (LDP), pushing the central bank to go to extraordinary lengths to revive growth in an economy slipping into its fourth recession since 2000. Abe repeated that the Bank of Japan should pursue “unlimited” easing of monetary conditions until prices rise, signalling he would adopt a much tougher stance with the independent central bank than the incumbent government. “If a commercial bank leaves reserves at the BOJ they get 0.1 percent, and this is too high when you look at what the consumer gets from their savings account,” Abe told a gathering of media and business executives.
“That’s why money always flows back to the BOJ. I think the BOJ will have to use zero interest rates or even use negative interest rates to spur lending.” After months of promising to call an election “soon”, Prime Minister Yoshihiko Noda is set to dissolve parliament’s lower house on Friday, setting up a snap vote for Dec. 16.
However, opinion polls suggest Noda’s Democratic Party of Japan is heading for a heavy drubbing in the election, with
Abe’s LDP clearly in the lead.
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