When it comes to the economy, Shinzo Abe, the new Japanese Prime Minister, means business. He has spelt out his economic priorities quite clearly — fixing the inflation at 2 per cent and, at the same time, trying to tame a stronger currency. He has also asked the Bank of Japan to ease the monetary policy in order to revive the world’s third biggest economy.
An extraordinary situation demands extraordinary measures. Abe has urged the Bank of Japan — the country’s central bank – to undertake unconventional steps for economic growth. Although his party, the Liberal Democratic Party, has threatened to revise a law that guarantees the independence of the Bank of Japan, Abe has said he will leave it to the central bank to decide on specific measures on monetary policy. His message is clear: the Bank of Japan will have to listen to his government to remain independent.
Abe will also have a number of priorities including rebuilding the northeastern part of the country devastated by the tsunami of 2011 that washed away settlements and neighbourhoods, affecting industrial production.
In terms of setting priorities, very few would doubt the merit of his agenda. However, in a globalised environment where economies are interdependent on a number of factors that are beyond a government’s control, things are not always as easy as they appear. Japan’s economic problems might not be of its own making — it’s part of the global economic ecosystem that’s currently struggling.
A clash with the Bank of Japan is unlikely at this point. A compromise would work well for the country.