U.S. Treasury Secretary Lawrence Summers suggested Thursday that the Bank of Japan should keep its "zero-interest-rate" policy in place while the nation pursues demand-led growth.
"The world economy will only be doing all that it can if it's firing on all engines," Summers said in an interview with CNN. before heading to Japan for today's Group of Seven finance ministers' meeting in Fukuoka. "That certainly means the second-largest economy of the world . . . has to continue to be on that objective of domestic demand-led growth."
Some analysts interpret the remark as support for maintaining the easy monetary policy until recovery led by an expansion in domestic demand is achieved.
It is necessary for Japan to ensure "domestic demand-led growth isn't just achieved but is sustained," Summers said.
The BOJ has recently indicated it may end the policy in the wake of a series of bright economic indicators in Japan.
The release of the BOJ's key business sentiment report this week shows a substantial improvement from three months earlier, which added fuel to speculation the policy may soon end.
The BOJ adopted the policy of guiding key short-term money rates to almost zero in February 1999 in a bid to revive Japan's economy by lowering borrowing costs for banks and business corporations.