Shinzo Abe, Japan’s incoming prime minister, has asked the Bank of Japan governor to set an inflation target of 2 per cent, posing a dilemma for the hawkish central bank as it heads into its two-day monthly monetary policy meeting.
Mr Abe, who led his Liberal Democratic party to victory in Sunday’s general election by calling for “unlimited” monetary easing and a reflationary economic policy, made the request directly to Masaaki Shirakawa, BoJ governor, who has set an inflation goal of 1 per cent and has been reluctant to ease more aggressively.
The renewed pressure by the incoming government puts Mr Shirakawa in a tight spot because Mr Abe has threatened to challenge the independence of the BoJ unless it co-operates. “I told him that I wanted an inflation target of 2 per cent . . . and to forge a policy accord with the BoJ to achieve that objective,” Mr Abe said.