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| Bank of Japan Moves to Fight Deflation | Bank of Japan Moves to Fight Deflation |
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| TOKYO — The Bank of Japan set an ambitious 2 percent inflation target and pledged to ease monetary policy “decisively” by introducing open-ended asset purchases, following intense pressure from the country’s audacious new prime minister, Shinzo Abe, who has made beating deflation a national priority. | TOKYO — The Bank of Japan set an ambitious 2 percent inflation target and pledged to ease monetary policy “decisively” by introducing open-ended asset purchases, following intense pressure from the country’s audacious new prime minister, Shinzo Abe, who has made beating deflation a national priority. |
| In a joint statement Tuesday with the government, the central bank said it was doubling its inflation target to 2 percent and said it would “pursue monetary easing and aim to achieve this target at the earliest possible time.” | |
| The Bank of Japan also said that it intended to purchase assets indefinitely, promising to stick to a program that has allowed the bank to pump funds into the Japanese economy, even with interest rates at virtually zero. The bank’s board voted to keep its benchmark rate at a range of zero to 0.1 percent. | The Bank of Japan also said that it intended to purchase assets indefinitely, promising to stick to a program that has allowed the bank to pump funds into the Japanese economy, even with interest rates at virtually zero. The bank’s board voted to keep its benchmark rate at a range of zero to 0.1 percent. |
| Since last year, when Mr. Abe was still opposition leader, he has urged the central bank to do more to end deflation, the all-around fall in prices, profit and incomes that has plagued Japan’s economy since the late 1990s. He has stepped up the pressure on the bank after a landslide victory by his Liberal Democratic Party in parliamentary elections in December, which catapulted him to office for the second time since a short-lived stint in 2006-07. | Since last year, when Mr. Abe was still opposition leader, he has urged the central bank to do more to end deflation, the all-around fall in prices, profit and incomes that has plagued Japan’s economy since the late 1990s. He has stepped up the pressure on the bank after a landslide victory by his Liberal Democratic Party in parliamentary elections in December, which catapulted him to office for the second time since a short-lived stint in 2006-07. |
| Mr. Abe’s push to increase the monetary supply, among other things, has weakened the yen, a boon to the competitiveness of exporters, which make up much of Japan’s growth. Earlier this month, Mr. Abe also announced a 12 trillion yen emergency stimulus, providing even more tailwind for the Japanese economy. That bright outlook has pushed the Nikkei stock index 20 percent higher since mid-November, when Mr. Abe first campaigned on his expansionary platform. | Mr. Abe’s push to increase the monetary supply, among other things, has weakened the yen, a boon to the competitiveness of exporters, which make up much of Japan’s growth. Earlier this month, Mr. Abe also announced a 12 trillion yen emergency stimulus, providing even more tailwind for the Japanese economy. That bright outlook has pushed the Nikkei stock index 20 percent higher since mid-November, when Mr. Abe first campaigned on his expansionary platform. |
| Mr. Abe’s critics, however, warn that the central bank, which will buy up more government bonds as part of its asset purchase program, will become a printing press for profligate government spending — spending that carries great risks for a country whose public debt is already twice the size of its economy. Critics also say that before flooding a broken system with money, Japan must first tackle structural problems that hurt economic efficiency. | Mr. Abe’s critics, however, warn that the central bank, which will buy up more government bonds as part of its asset purchase program, will become a printing press for profligate government spending — spending that carries great risks for a country whose public debt is already twice the size of its economy. Critics also say that before flooding a broken system with money, Japan must first tackle structural problems that hurt economic efficiency. |
| Mr. Abe maintains that deflation will undermine any efforts to grow, and that the government and central bank must act together to get prices rising again. But in a nod to critics, the joint statement said the government would also promote “all possible decisive policy actions for reforming the economic structure” and establish “a sustainable fiscal structure.” | Mr. Abe maintains that deflation will undermine any efforts to grow, and that the government and central bank must act together to get prices rising again. But in a nod to critics, the joint statement said the government would also promote “all possible decisive policy actions for reforming the economic structure” and establish “a sustainable fiscal structure.” |