The head of the Bank of Japan warned yesterday that the government is solely responsible for maintaining trust in the country’s finances, in a thinly veiled show of discontent over premier Shinzo Abe’s decision to postpone a sales tax increase.
While Haruhiko Kuroda avoided directly criticising the delay in the tax increase, which had been slated for next October, he urged the government to meet its fiscal target and abide by last January’s agreement with the central bank.
Under that agreement, the BoJ pledged to hold responsibility for meeting its inflation target, while the government promised to take steps to fix Japan’s tattered finances.
“We hope the government steadily implements measures to create a sustainable fiscal structure,” Kuroda told a news conference yesterday after a central bank meeting.
“Fiscal discipline is the responsibility of the government and parliament, not that of the central bank,” said Kuroda, who repeatedly urged Abe to proceed with the tax hike.
Abe announced on Tuesday that he would call an early election to seek a fresh mandate for his economic policies, and delayed a second increase in the tax by 18 months to April 2017.
Abe justified his decision by pointing to Monday’s data showing the economy unexpectedly slipped into recession in the third quarter due to the lingering impact on spending from a tax hike in April.
In a widely expected move, the BoJ voted to continue its massive stimulus efforts by purchasing more government bonds and risky assets to increase base money at an annual pace of 80 trillion yen ($683 billion).
The postponement of the tax hike compounds problems for Kuroda, who already faces a divided board and markets that are questioning his credibility.
Kuroda said last month’s easing was not intended to nudge Abe into proceeding with the tax hike.
“It was solely aimed at ensuring we achieve our 2 per cent inflation target. I’ve never felt that (last month’s easing) was wrong or that we should have waited longer,” he said.
But the delay in raising the tax stokes worries that the BoJ’s ultra-easy monetary stance is bank-rolling an alarmingly high public debt, already the highest among major economies.
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