WRAPUP 1-BOJ

21/04/2010 11:10

WRAPUP 1-BOJ, govt at odds onNike Zoom Lebron V inflation targeting The Bank of Japan said inflation targeting does not work, setting it on course for Nike Zoom Lebron VIa clash with the finance minister, who said it was worth listening toNike Zoom Mvp X Nash ruling party lawmakers' calls for a binding target to escape deflation. The Democratic Party-led government has influenced BOJ monetary policy before. Should Finance Minister Naoto Kan warm further to inflation targeting, that could lead toPaul Pierce more monetary easing. Japanese retail investors are also worried that deflation and rising commodity prices will hamper growth, a Reuters survey showed, which would support the BOJ's stance ofPenny Hardaway keeping its easy policy for the time being. Democrat lawmakers are pushing the government to take drastic steps to boost economic growth as public support for Prime Minister Yukio Hatoyama's cabinet crumbles beforeTony Parker an election expected in July for parliament's upper house. The group of Democrats calling for an inflation target doesn't include senior party members, making it uncertain whether they can influence policy. But there is growing disquiet over the slump in the opinion polls,Jordan 1 which may make the government more susceptible to bold statements it thinks will appeal to voters. "Given the declining popularity of the government, it is likely more out-of-the-box thinking will show up," said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong. "I would look at this with hope and not with worry. Everything should be done to Jordan 2turn Japan around, which is suffering from long-term deflation." BOJ board members' understanding of long-term price stability centres on a 1 percent rise in consumer prices. BOJ Governor Masaaki Shirakawa said on Tuesday that this is better than an inflation target because it means the bank is not easily swayed by short-term price Jordan 3fluctuations. Under inflation targeting, a central bank guides interest rates to achieve a predetermined rise in consumer prices over a certain period. A central bank without a target also tries to control prices but its desired level of inflation is less explicit. The implications for Jordan 5 the BOJ are significant because it could allow the government to hold the BOJ accountable for something economists say is likely unachievable due to a large output gap. "We're at a stage where some are having second thoughts about inflation targeting," Shirakawa said in the lower house financial affairs committee. "When Jordan 4 the global economy was growing well in the 2000s, people focused too much on short-term prices. This led to an excessively long period of low rates, which created excess credit and led to increased leverage. When this was unwound, it had a big economic impact." Finance Minister Naoto Kan reiterated his desire for a 1 to 2 percent gain in prices in the same committee. Speaking to reporters earlier, he said he wouldn't discount a proposal from within his own party to target a 2 percent rise in consumer prices over two years. "It is not an outlandish target at all," Kan said after a cabinet meeting. "I think it is worth listening to." Kan has been careful to avoid explicitly saying he wants an inflation target, but his past comments have given that impression. [ID:nTOE62109M] A Jordan 6 leading member of a panel of 130 ruling party lawmakers is trying to persuade the party to adopt its anti-deflation proposals in its campaign platform for the election expected in July, but it is far from certain whether this will happen. [ID:nTOE63F06Q] Deflation can hurt the economy as consumers tend to delay spending because they expect prices to fall more, which in turn depresses capital spending. Deflation can also hurt borrowing because real interest rates are higher than nominal rates. Japanese retail investors turned positive on Japanese stocks in April for the first time in Jordan 7almost three years, as the global economic recovery sparked a rally in major share markets that pushed the Nikkei stock average to an 18-month high. [ID:nTKC005807] This optimism, tempered by lingering worries about deflation, is in line with the BOJ's and the government's assessment that Japan's recovery will continue due to growing exports, but that consumption and corporate spendingJordan 8 will remain lacklustre due to Japan's large gap between supply and demand. The BOJ may lift its consumer price forecast for fiscal 2011/12 to zero change or slight positive growth from a forecast of a 0.2 percent decline when it updates its outlook on April 30, according to sources. That is still distant from the BOJ's and Kan's understanding of Jordan 9price stability. Japan's core consumer prices fell 1.2 percent in February from a year earlier, marking a full year of deflation. [ID:nTOE62P00E] In response, the BOJ has kept its benchmark rate at 0.1 percent. Last month it doubled the amount of low-interest funds it offers to banks in three-month loans, in response to prodding from the government. The funding scheme has brought down money market rates, but it hasn't led to an increase in lending to companies.  http://tomgreen.com/blogs/qiusisi
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