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Japan’s Economic and Fiscal Policy Minister urges the BOJ not to raise rates, sort of

January 16, 2007
By Ken Worsley


Well, she’s officially done it. In a move widely expected by this observer, Japan’s Economic and Fiscal Policy Minister, Hiroko Ota, went public yesterday with her request that the Bank of Japan not raise interest rates during it’s policy meeting this week.

Here’s what she had to say on Monday:

[The Japanese economy] is in an extremely crucial period of getting out of deflation and consumption is weak, and the Bank of Japan must be sharing this point of view. We would like for (the BOJ) to support an ongoing self-sustained growth and help the economy move out of deflation. To exit deflation is the most important goal this year.

Well, the BOJ seems to be of the opinion that the economy is already out of deflation. After all, core consumer prices just went up in November for the sixth straight month, right? Well, a paltry 0.2%, but rising prices won’t lead to a fall in consumption so long as people are making more, right? Which they are - again, just barely. Very, very barely. Last year, the average worker received the equivalent of a Bush tax refund: a $400 hike in annual wages.

And this January 1st, the personal income tax cuts were fully eliminated. So much for that $400 raise (and a little more, but who’s counting?)

Back to Ota. This morning she was asked if the government would directly request that the BOJ not raise interest rates. The following non-answer followed:

I can’t comment on a hypothetical matter. The government will now start considering how it would deal with such a situation.

Will now start considering? The meeting starts tomorrow. It seems as though she has the tatemae part down well indeed!

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Comments

2 Responses to “Japan’s Economic and Fiscal Policy Minister urges the BOJ not to raise rates, sort of”

  1. Adamu on January 16th, 2007 8:36 pm

    What’s sad about Ota and the CEFP of which she’s supposed to be the head, is that there aren’t any headlines coming from her office on promoting structural reforms. No bold numerical targets showed up in the Basic Policy document and Ota herself is seen as a political nobody, with the lead in CEFP meetings being taken by Chief Cabinet Secretary Shiozaki. This slide to obscurity started when Kaoru Yosano was put in charge because of his close ties to the MOF (the very ministry the CEFP was supposed to keep in check more than any other). Sigh…

  2. Ken on January 16th, 2007 10:32 pm

    I think you’re pretty on with that. Absolutely nothing has come out in terms of structural reforms, not even anything related to “Beautiful Finance.” In a sense, Ota is a political nobody, the only non-elected politician in the cabinet, having come from a professorship at National Graduate Research Institute for Policy Studies, though she had worked with the Cabinet office since at least 2002 (I’m pretty sure you know all this…).

    Anyway, I was thinking that bringing a few political nobodies into the kantei might help, give some perspective. She hasn’t been able to do so yet - she’s got a lot to deal with I’m sure in the way of entrenched MOFers.

    Same goes for the ’special advisors.’ I think a lot of people hoped they would help plow through red tape, but no structural reform has been put on the table. Then again, Abe’s not going to have his agenda out in the open the way Koizumi did. Koike has practically said that the National Security Council isn’t going to work…etc, etc.

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