Bank of Japan deputy governors pledge to meet inflation target, show policy flexibility

By Stanley White and Tetsushi Kajimoto

TOKYO (Reuters) – The Bank of Japan’s two new deputy governors pledged on Tuesday to meet the central bank’s 2 percent inflation target as soon as possible, but both showed signs of willing to be flexible on monetary policy.

Masazumi Wakatabe, an academic known as vocal advocate of aggressive monetary stimulus, said it is possible that he will update his knowledge and decisions on policy now that he is one of the BOJ’s new deputy governors.

Masayoshi Amamiya, a career central banker who holds the second deputy governor post, said it is possible to argue with Governor Haruhiko Kuroda on policy, suggesting he is open to expressing views that differ from the head of the central bank.

Remarks from the BOJ’s two newest board members highlight the difficult task the central bank faces in maintaining its massive quantitative easing program in the face of stubbornly weak consumer price inflation and worries that it is starting to distort financial markets.

“I am not going to change my opinions just because I’m a deputy governor,” Wakatabe said.

“It is possible for me to update my knowledge and decisions on policy now that I’m inside the bank and have access to different data. In fact, I hope this will happen.”

Wakatabe and Amamiya officially assumed their posts on Tuesday after being approved last week in parliament, where Prime Minister Shinzo Abe’s ruling coalition holds a comfortable majority in the both chambers.

The BOJ’s aggressive monetary easing is an essential component of Abe’s package of policies to reflate the economy, known as ‘Abenomics.’

The change in personnel comes at a crucial time for the BOJ. The central bank has pursued unprecedented quantitative easing for the past five years by purchasing government bonds and assets related to the stock market.

The BOJ’s easing has helped increase bank lending and corporate investment, but consumer prices have been much slower to rise.

Many economists worry that the BOJ’s policy framework is unsustainable and the next test will be how the BOJ can scale back its stimulus without disrupting financial markets.

Both Wakatabe and Amamiya dismissed these concerns on Tuesday and stressed that the BOJ needs to stick with its current framework because the 2 percent price target is still distant.

Wakatabe reiterated his view that the BOJ should not hesitate to ease policy further if needed. Amamiya did not comment directly on the need for additional easing, but he did express his resolve to keep policy easy.

“It is important to continue with powerful monetary easing to achieve an improvement in the output gap,” Amamiya said.

At the BOJ’s March policy meeting, the BOJ kept monetary settings unchanged and its chief brushed aside speculation of an early exit from quantitative easing.

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