Monday, March 4, 2013
DJ: Only Monetary Policy Can Exert Influence On Inflation Expectations: Iwata
TOKYO--One of the Japanese government's nominees for the position of deputy governor of the Bank of Japan said Monday that increasing the monetary base is effective in raising inflation expectations, as it can encourage companies to invest by using some of their cash holdings.
Challenging the widespread view that increasing the monetary base alone can't lift Japan out of deflation as long as demand for lending remains sluggish, Gakushuin University Professor Kikuo Iwata said, "I have been saying for the past 15 years that this belief is a misunderstanding, and is wrong."
Speaking at a symposium in Tokyo, Mr. Iwata emphasized that only the central bank can raise inflation expectations.
He added that a recently adopted 2% inflation target would not result in government debt financing by the BOJ, but instead could deter it, as the central bank can move to tighten monetary policy if the consumer price index keeps rising above 2%.