Hatoyama urges deflation war together
By Leika Kihara |
March 13, 2010, Saturday
|
Print Edition
Print Edition
JAPAN'S prime minister said the government and the Bank of Japan should work together to beat deflation as he fended off mounting political pressure for action on the economy and the yen, raising expectations that the central bank will ease monetary policy next week.
The prime minister, finance minister and central bank governor were grilled by lawmakers yesterday on what they intend to do to defeat deflation and prevent the strong yen from harming an economy struggling to recover from the global downturn.
Although the economy is growing slowly, weak domestic demand is contributing to deflation, which many policymakers fear could push Japan back into a damaging downturn ahead of upper house elections expected in July.
The yen rose last week to a three-month high against the United States dollar, and speculators are gearing up for a yen rally, raising concerns that exports could take a hit and deflation deepen.
Both Prime Minister Yukio Hatoyama and Finance Minister Naoto Kan said the government was ready to act if the yen moved excessively.
But their comments were seen as adding pressure on BOJ to ease policy further, rather than as a call for currency intervention. The comments lifted market expectations that there will be some kind of easing steps by the BOJ next week, said Hideki Hayashi, global economist at Mizuho Securities.
The prime minister, finance minister and central bank governor were grilled by lawmakers yesterday on what they intend to do to defeat deflation and prevent the strong yen from harming an economy struggling to recover from the global downturn.
Although the economy is growing slowly, weak domestic demand is contributing to deflation, which many policymakers fear could push Japan back into a damaging downturn ahead of upper house elections expected in July.
The yen rose last week to a three-month high against the United States dollar, and speculators are gearing up for a yen rally, raising concerns that exports could take a hit and deflation deepen.
Both Prime Minister Yukio Hatoyama and Finance Minister Naoto Kan said the government was ready to act if the yen moved excessively.
But their comments were seen as adding pressure on BOJ to ease policy further, rather than as a call for currency intervention. The comments lifted market expectations that there will be some kind of easing steps by the BOJ next week, said Hideki Hayashi, global economist at Mizuho Securities.
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