TOKYO (Reuters) -Japan’s largest opposition party called for lowering the central bank’s inflation target and giving it more flexibility to raise interest rates on Tuesday as it released its campaign pledges for next month’s upper house elections.
Under pressure from then-Prime Minister Shinzo Abe to take bolder steps to beat deflation, the Bank of Japan in 2013 signed a joint statement with the government committing itself to achieve a 2% inflation target "at the earliest date possible."
Since then, the ruling Liberal Democratic Party - to which Abe belonged - has ruled out modifying the statement even as inflation exceeded the 2% target, drawing public complaints about the rising cost of living and prompting the central bank to raise interest rates to 0.5%.
In its campaign pledge for July’s upper house election, the opposition Constitutional Democratic Party of Japan (CDPJ) called for changing the joint statement to give the BOJ more flexibility to raise interest rates and reverse yen falls that are blamed for pushing up import costs.
"We’d like to give the BOJ more flexibility in guiding monetary policy by setting an inflation target of around zero percent with some room for allowance," the CDPJ’s head Yoshihiko Noda told a press conference.
Prime Minister Shigeru Ishiba’s minority coalition has suffered from low approval ratings due in part to public discontent over rising living costs.
Some analysts expect Ishiba’s LDP to suffer big losses in the forthcoming election, raising the chance of it forming an alliance with opposition parties such as the CDPJ.
The BOJ exited a decade-long, massive stimulus last year and raised short-term rates to 0.5% in January. The slow pace of policy normalisation has been blamed by critics as causing excessive yen falls that accelerated cost-push inflation.