© Reuters. FILE PHOTO: Democratic Party for the People’s policy chief Kenta Izumi delivers a speech after Yukio Edano won the major opposition party leadership race in Tokyo, Japan on September 10, 2020. David Mareuil/Pool via REUTERS

By Kentaro Sugiyama and Daniel Leussink

TOKYO (Reuters) – The next governor of the Bank of Japan should be someone who can steer the central bank toward an exit from ultra-easy monetary policy, Kenta Izumi, head of the country’s largest opposition party, said Thursday.

Izumi, chairman of the left-wing Constitutional Democratic Party of Japan (CDPJ), also said the recent declines in the yen could hurt the economy by driving up import costs.

“We are starting to see bad inflation,” fueled by a weak yen and rising commodity prices, Izumi told Reuters.

“The impact is really starting to get big,” he said, adding that rising prices of imported goods hurt people’s livelihoods and businesses.

Izumi, who said households were being hit by high fuel and food costs, has instructed his party’s policy inquiry committee to draft measures to deal with rising prices.

The comments highlight a reversal in the way Japanese politicians perceive the pros and cons of a weak yen.

Some of the key members of the CDPJ are from the former Democratic Party of Japan, which, after taking power in 2009, has repeatedly put pressure on the BOJ to ease monetary policy to prevent a strong yen from hurting the export-dependent economy.

The BOJ is likely to keep monetary policy stable as it says it will not withdraw stimulus until its 2% inflation target is met in a stable manner, Izumi said.

But the central bank may need to consider revising monetary policy if inflation continues to climb, he added.

Any shift in BOJ policy could be related to the government’s choice of a successor to incumbent governor Haruhiko Kuroda, whose second five-year term ends in March 2023.

After Kuroda launched a massive asset-buying program in 2013 to pull Japan out of deflation, Kuroda has consistently called for ultra-easy monetary policy to meet its elusive 2% inflation target.

But the BOJ has been increasingly criticized for the rising costs of prolonged easing, such as the blow to bank profits from years of ultra-low interest rates.

Some lawmakers also blame the BOJ’s facile policies for weakening the yen and aggravating rising import costs.

“The government should choose someone who has a clear idea of ​​how the BOJ could normalize monetary policy,” Izumi said.

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This post Japan’s opposition head calls for BOJ governor to direct stimulus exit

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