Academics, execs urge BOJ to switch to longer-term inflation target

The Bank of Japan's 2 percent inflation target should be redefined as a "long-term" one to give its monetary policy more flexibility, a panel of scholars and corporate executives said Monday, calling for a review of a decade-old joint statement between the central bank and the government underpinning the goal.

The panel also stressed the need for a "normalization" of bond markets where the BOJ has commanded a huge presence by buying government bonds to keep bond yields extremely low to support the economy, even though the central bank has recently begun allowing 10-year bond yields to trade more widely to fix market distortions.

"The government and the BOJ should examine the effects of their policies over the past 10 years...and then draw up and release a new joint statement," the panel said in a set of proposals released Monday. "They should acknowledge that fiscal and monetary policies have been negatively impacting each other."

Prime Minister Fumio Kishida is set to choose a successor to BOJ Governor Haruhiko Kuroda, whose term will end in April after staying at the helm for a decade and pushing for bold monetary easing that once formed a key pillar of the "Abenomics" economy-boosting program under Kishida's predecessor Shinzo Abe.

Government sources have said the existing joint accord, made in 2013, would be revised with the BOJ getting a new governor. In the agreement aimed at bringing an end to deflation, the central bank vows to attain the 2 percent target "at the earliest possible time."

"Price gains should not be the objective or goal in and of itself. They should come with higher growth rates and wage growth," said panel member Nobuyuki Hirano, a special adviser to MUFG Bank who also serves as vice chairman of the nation's powerful business lobby Keidanren.

"The 2 percent price stability target will not be achievable when the nation's potential growth rate is less than 1 percent. We wanted to make it clear that a long period of time and a combination of various policies are needed to realize it," Hirano said at a press conference.

Yuri Okina, chairperson of the Japan Research Institute who is seen as a candidate for one of the BOJ's two deputy governors, also attended the conference as a panel member.

The panel stressed the need for the government and the BOJ to aim together for higher productivity, wage growth and price increases in a stable manner.

The BOJ remains committed to ultralow rates despite the country's core consumer prices rising twice as fast as the 2 percent target. Years of monetary easing have helped curb debt-servicing costs for the government while Kuroda has repeatedly said the inflation target has yet to be reached in a stable fashion.

© Kyodo News