Japanese prime minister Yukio Hatoyama and central bank governor Masaaki Shirakawa met today. They agreed about everything. According to Dow Jones:
“We exchanged general economic and financial views,” Shirakawa told reporters. “As I have repeatedly said, the government and the BOJ share similar economic views,” he added.
According to Reuters, Japan’s finance minister Naoto Kan explained the government’s fiscal policy to Mr Shirakawa at the meeting. They all plan to get together again every three months.
This hardly supports the hypothesis that the BOJ is under intense pressure from the government to take further action on deflation. It rather supports the hypothesis that the government wants to divert any political flak over deflation to the BOJ and the BOJ will make minor tweaks to monetary policy to accommodate it.
If and when Mr Hatoyama and Mr Kan start talking about legislation to set an inflation target, or government guarantees for the BoJ if it expands its balance sheet to buy risky assets, then we’ll now that the politicians are for real.
