It is strange to see BOJ taking criticism about doing “too little”, especially as BOJ has been the most aggressive Asian Central Bank in its attempt to weaken the Yen and keeping interest rates extremely low. Furthermore, it is also the only Central Bank that has received global collaboration aid from G7 Central Banks in its attempts to ease. Furthermore, BOJ is simply the execution arm of the Japanese Finance Ministry, not a decision making one, which makes the accusations even weirder.
Regardless, with Shinzo Abe looking likely to win in the upcoming election, and Ito earmarked to be the next BOJ governor, we could see a freshly invigorated BOJ attempting to push Yen weaker in 2013.
The Bank of Japan has failed to end more than a decade of deflation by being too cautious, said Takatoshi Ito, a former finance ministry official who is a contender to become the central bank’s next governor.
The bank’s board under Governor Masaaki Shirakawa, who steps down in April, has done “too little, too late,” Ito, dean of Tokyo University’s Graduate School of Public Policy, said yesterday in an interview in Tokyo. The BOJ should have started its asset-purchase program earlier and has been “extremely passive in building inflation expectations,” he said.
Ito’s criticism of the central bank echoes that of opposition leader Shinzo Abe, whose Liberal Democratic Party is leading in polls to win a national election on Dec. 16. Abe’s call for unlimited easing and an inflation target of 2 percent sent the yen to a seven-month low last month.
“Inflation targeting will become a very important element” to stamp out deflation, Ito, 62, said. “It’s worth trying in order to pull Japan out of a deflationary spiral that has lasted 15 years.”
The yen has weakened around 1.4 percent against the dollar since Abe’s remarks in November, the most among 16 major currencies tracked by Bloomberg, a reaction that Ito said was positive. As of 9:09 a.m. in Tokyo, the currency was at 82.47.
Ito was nominated for BOJ deputy governor in 2008 by the LDP when the party was last in power. He was rejected by the opposition-controlled upper house of parliament along with two candidates for governor who, like Ito, had been finance ministry officials. Ito was deputy vice-finance minister from 1999 to 2001.
Via – Bloomberg
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