The Bank of Japan must raise interest rates and continue phasing out a controversial stimulus programme blamed for causing unwelcome yen declines, Yoshihiko Noda, leader of the country’s biggest opposition party, told Reuters on Friday.
Noda said in an interview that Japan needs to focus more on getting its fiscal house in order by ending big, crisis-mode spending and finding ways to boost tax revenues, such as raising the capital gains tax rate.
The remarks underscore the hope of Noda’s Constitutional Democratic Party of Japan to capitalise on growing public discontent over the rising cost of living, driven partly by higher import costs from a weak yen.
They also highlight the party’s resolve to differentiate itself from the ruling coalition’s focus on underpinning the economy with big spending plans.
Noda, who served as prime minister from 2011 to 2012, criticised former BOJ Governor Haruhiko Kuroda’s decade-long, radical stimulus programme – deployed in 2013 – for side effects including excessive yen weakness.
While the BOJ dismantled most of Kuroda’s stimulus in March, it has not completely left it behind and is persisting unnecessarily in pursuing its target of boosting inflation to a sustainable rate of 2%, Noda said.
The weak yen, caused partly by sticking to Kuroda’s stimulus for too long, has done more harm than good to Japan’s economy by pushing up import costs and hurting households, he said.
“It is wrong to focus too much on keeping monetary policy ultra-loose when Japan is experiencing inflation,” he added. “The BOJ should raise interest rates gradually without committing to hike at a set pace.”
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