TOKYO, Sept 29 (Askume) – Japan ’s incoming Prime Minister Shigeru Ishiba said on Sunday the country’s monetary policy would remain loose, signalling the need to keep borrowing costs low to support a sluggish economic recovery.
It was unclear whether Ishiba, who has been a vocal critic of the Bank of Japan’s aggressive monetary easing in the past, would take a more dovish stance in his comments.
Asked about the central bank raising interest rates further, Ishiba told public broadcaster NHK: “The Bank of Japan, which is tasked with achieving price stability, will work with the government to make necessary decisions on this matter.”
He said, “From the government’s point of view, given the current economic conditions, monetary policy should remain accommodative.”
On fiscal policy, Ishiba said he aimed to quickly develop a package of measures to cushion the economic damage caused by rising living costs, with a focus on helping low-income households.
Ishiba, a former defence minister, will become prime minister on Tuesday after winning the presidency from the ruling Liberal Democratic Party on Friday.
After the victory, Ishiba said monetary policy would remain broadly accommodative, but added that he would still not object to raising interest rates to near zero.
The Bank of Japan ended negative interest rates in March and raised short-term borrowing costs to 0.25% in July, a historic reversal from a decade of aggressive stimulus policies.
Bank of Japan Governor Kazuo Ueda said he is prepared to raise interest rates if Japan makes progress toward the central bank’s 2% inflation target, as the board forecasts.
Ishiba told Askume in August that the Bank of Japan was on the “right policy path” by ending negative interest rates and backed further normalization of monetary policy, saying it could improve industrial competitiveness. But in an interview this month he said Japan should prioritize fully emerging from deflation and cautioned against signs of weak consumption.
The yen fell on Friday on news the Liberal Democratic Party (LDP) Ishiba will also run in a second round of a leadership election against a moderate rival who has returned to power after winning the election.
