Japanese Prime Minister Ishiba says he will not intervene in BOJ rate policy By Reuters
Written by Leika Kihara
TOKYO (Reuters) – Japanese Prime Minister Shigeru Ishiba said on Saturday he would not intervene in monetary policy matters, as the central bank is tasked with achieving price stability.
“It is important to avoid meddling” in matters of monetary policy, even if it appears that you are doing so, Ishiba said at a press conference gathering leaders of the major parties ahead of the October 27 general election.
“No matter what the government says, the Bank of Japan makes an individual decision on policy,” Ishiba said. “I believe the BOJ governor and staff have a strong sense of commitment to achieving price stability.”
Ishiba also said that spending power is the key to achieving a continued exit from the currency reduction, calling for measures to improve real wages.
The former defense minister became Japan’s prime minister on October 1 after winning the race for the leadership of the ruling party.
A day after taking office, Ishiba surprised markets by saying the economy was not yet ready for an interest rate hike, apparently in response to his previous support for the BOJ ending decades of extreme monetary stimulus.
The surprisingly dovish remarks sent the yen lower against the dollar and cast fresh doubt on how aggressive the BOJ will be in raising rates.
Historically it is rare for a head of state to comment directly on the BOJ’s interest rate policy in public, as that would violate the central bank’s – legally mandated – independence in setting monetary policy.
The BOJ ended negative interest rates in March and raised the benchmark short-term rate to 0.25% in July on the assumption Japan is making progress in sticking firmly to its 2% inflation target.
Governor Kazuo Ueda has indicated that the bank is ready to continue raising interest rates if economic development and prices go in line with its forecast.
While politics is unlikely to affect the long-term rate hike issue, analysts say uncertainty about Ishiba’s stance on monetary policy and the outcome of the Oct. 27 election could complicate the BOJ’s decision on how quickly to raise borrowing costs.
