Kamei Urges Bank of Japan to Underwrite Debt to Beat Deflation
Japanese Financial Services Minister Shizuka Kamei said the central bank should contemplate directly purchasing debt from the government to help overcome deflation.
“The central bank should consider underwriting debt to help the government create funds for fiscal stimulus,” Kamei said at a parliamentary hearing in Tokyo today. By law, the Bank of Japan is prohibited from buying debt directly.
Kamei, who heads a junior coalition party, said the central bank alone won’t be able to eradicate price declines and that fiscal policy is also needed. Finance Minister Naoto Kan replied by saying fiscal discipline must always be exercised even though spending can help prop up the economy and beat deflation.
“It’s necessary to provide funds for bold fiscal spending” with direct purchases of debt from the central bank, Kamei said. “Without fiscal stimulus funds, Minister Kan can’t resolve the economy’s output gap. He’s not a magician.”
Kamei is head of the People’s New Party. He has championed that increased government spending is key to spurring growth and last year forced the government to delay unveiling a stimulus package Kamei said was too small.
“Japan can’t overcome this economic crisis unless the Bank of Japan shows its commitment by going as far as” underwriting debt to pay for government spending, Kamei said paydayloans.
Kan, a member of the ruling Democratic Party of Japan, has put heat on the central bank to do more to halt price declines and last month indicated he wanted Bank of Japan Governor Masaaki Shirakawa to implement an inflation target. The finance chief said he wants to stamp out deflation as soon as this year and reiterated that he wants the bank to target inflation of 1 percent or higher.
‘Be Ambitious’
“Given that various efforts to overcome deflation have failed, I won’t say we can immediately overcome this in a few months,” Kan said. “If I were allowed to be ambitious, I’d say I want prices to rise within the year” adding that “that is just my hope.”
Consumer prices excluding fresh food, the central bank’s key gauge of inflation, slid 1.3 percent in January from a year earlier, an 11th straight decline, the government said last week.
Shirakawa, also speaking to lawmakers, said he is committed to keeping policy very accommodative and that having the benchmark overnight lending rate at 0.1 percent has helped lower borrowing costs for companies.
The bank currently buys 1.8 trillion yen ($20 billion) of government bonds from lenders each month.
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