An adviser to the Bank of Japan and longtime colleague of Gov. Haruhiko Kuroda is warning that a delay by Prime Minister Shinzo Abe to raise the consumption tax would have profound implications for monetary policy.
"The BOJ is buying a massive amount of bonds to lower yields and create inflation," said Masahiro Kawai, who co-wrote an article with Kuroda calling for the BOJ to adopt an inflation target years before his friend became governor of the central bank. "By postponing the tax hike, Abe would lose fiscal trust, raise risk premiums and make the BOJ's job much harder."
Kawai gave an interview in Tokyo on Tuesday after signs spread that Abe will call an early election next month to get public backing for a move to delay raising the consumption tax.
With your current subscription plan you can comment on stories. However, before writing your first comment, please create a display name in the Profile section of your subscriber account page.