TOKYO, Oct 21 — Japan's new Prime Minister Sanae Takaichi hopes the central bank will conduct monetary policy to sustainably achieve two per cent inflation driven not just by rising raw material costs but also by wage gains.
She said that monetary policy is part of a broader economic policy, for which the government holds final responsibility, adding that the specific means of monetary policy were up to the Bank of Japan (BOJ) to decide.
"What is most important is for the BOJ and government to coordinate policy and communicate closely.
"I hope the BOJ conducts monetary policy appropriately towards sustainably and stably achieving its price target driven not just by cost-push factors, but accompanied by wage gains," Takaichi said during a press conference today.
She was responding to queries about whether further BOJ rate hikes were appropriate, partly to avoid low borrowing costs from triggering unwelcome yen falls.
The bank's next two-day policy meeting ends next Thursday (October 30), with its board due to conduct a quarterly review of its growth and inflation forecasts and debate whether to raise interest rates from the current 0.5 per cent.
Takaichi, known as an advocate of expansionary fiscal and monetary policy, was elected Japan's first female Prime Minister today. The Parliament vote drove down the yen and bond yields on expectations that her presence could delay further interest rate hikes by the BOJ.
She noted that she had no immediate plan to revise a joint agreement between the BOJ and the government, which pledges to cooperate in pulling Japan out of economic stagnation.
The joint statement, first agreed on in 2013, focuses on the need to exit deflation — a policy priority at the time but one analysts see as growing outdated as the rising cost of living becomes Japan's more pressing economic problem.
