Tokyo: Japanese Finance Minister Naoto Kan said he wanted to work with the Bank of Japan towards their common goal of beating deflation, keeping up a drumbeat of pressure on the central bank for further monetary easing.
The remark came a day after the BOJ held off on new policy initiatives at a rate review and its governor, Masaaki Shirakawa, fended off pressure by saying the government should respect the bank's independence to avoid unsettling markets.
"The government and the BOJ are moving in the same direction towards eradicating deflation. The government is working on this through fiscal and tax policies, while the BOJ is doing its part through monetary policy," Kan told a news conference after a cabinet meeting yesterday.
"I believe and I expect we can move forward on this under a common understanding," he said.
Kan's comments were not in response to questions from reporters, suggesting he was keen to state his views on the matter. They come just days after he turned up the heat on the BOJ by mentioning an inflation target.
The government, burdened with a massive fiscal debt, has been leaning on the BOJ to support the fragile economy even as most other major central banks consider rolling back steps put in place during the global economic crisis.
The Federal Reserve on Thursday raised its emergency lending rate for the first time since the financial crisis, lifting the dollar and hitting bonds despite Fed assurances it was not a prelude to a rise in its main policy rate.
Kan said the Fed's hike was not negative for Japan's economy as it weakened the yen against the dollar.
The BOJ has said it is committed to fighting deflation and will keep interest rates near zero, but it has very few regular policy options left and has been hesitant to yield to government calls to buy more government bonds for fear of giving markets the impression it is monetising debt.
Kan told parliament yesterday that beating deflation was crucial for Japan to restore its finances while keeping the economy afloat.
"If we drastically cut spending to maintain fiscal discipline, it would have a negative effect on the economy and therefore threaten our growth strategy," Kan said.
