Japan minister sets deadline to beat deflation
Japan's finance minister said he wants the country to pull out of deflation by the end of this year, setting a deadline much earlier than the Bank of Japan's (BoJ) forecast as he ratchets up pressure for further monetary easing.
The country's outspoken banking minister Shizuka Kamei went further, saying the central bank should directly underwrite public debt to finance government spending.
"Escaping deflation is difficult so we won't see an immediate improvement such as in several months. But taking two to three years would be too long," Finance Minister Naoto Kan told a lower house financial committee yesterday.
"Hopefully, we want Japan to see prices turn positive by the end of this year," he said, adding that he hopes the BoJ will work with the government in overcoming deflation.
The BoJ forecasts three years of deflation until March 2012 and has said it is committed to fighting deflation, but has offered few clues on what it might do in the future. Core consumer prices fell 1.3 per cent in the year to January, marking the 11th straight month of annual declines.
The government, hobbled by ballooning public debt, has been pressuring the BoJ to support the fragile economy.
With the economy barely out of recession and supply still outstripping demand by a huge margin, analysts do not expect Japan to escape deflation any time soon.
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