By Stephen Cannon, BridgeNews
Tokyo--Feb. 7--Finance Minister Kiichi Miyazawa hinted Wednesday that quantitative easing might be a viable monetary policy to help stimulate Japan's economy out of its decade long slump. Miyazawa is generally very cautious to respect the central bank's independence, but he made definite jabs to pressure the BOJ with roundabout comments just two days before the Bank of Japan's Friday policy board meeting.
* * * Speaking to comments made by state minister for Economic and Fiscal Policy Taro Aso that quantitative easing might not be effective, Miyazawa said, "Well speaking to only Aso's comment, and regardless of what the BOJ should or shouldn't do, I can't really say that's true," Miyazawa said speaking at a regular press conference.
Senior legislators in the dominant Liberal Democratic Party such as stock panel head Hideyuki Aizawa have been pushing for the Bank of Japan to use quantitative easing as a method to boost Japan's flagging stock market.
Speaking to Aizawa's requests, Miyazawa said, "I'll leave party issues up to the party. I have no comment (on monetary policy steering)." Until now, Miyazawa has given little overt indication of his position on monetary policy steering, but as the effects of the economic slowdown in the United States visit the Asian region, fears that Japan's economy could slip back into economic contraction are heightening.
However, while Bank of Japan Governor Masaru Hayami concedes that Japan's economy has slowed, he has given no indication that the central bank is considering further loosening its 0.25% overnight unsecured call rate.
A quantitative easing policy would target a specific money supply level as opposed to a specific interest rate level, and politicians are likely expecting a policy that would lead to both a higher money supply and lower short-term interest rates.
Miyazawa also said that he doesn't oppose the coalition government parties' joint initiative to relax regulations restricting corporations from purchasing their own stock as a measure to spur Japan's stock market. Among the coalition parties' proposals to boost stock share prices, this corporate equity buyback scheme has attracted the most attention, but some have warned that the measure could invite insider-trading risks.
Toyota Motor Corp. Chairman Hiroshi Okuda also said he is "outraged" by the allegations that the U.S. $2.2 billion equity buyback that Toyota conducted in January was motivated by insider trading. End Copyright 2001 Bridge Information Systems Inc. All rights reserved.