Veteran ruling party lawmaker Amari warns BOJ against raising rates

TOKYO (Reuters) – Japan has yet to see economic conditions fall into place for the central bank to raise interest rates, Akira Amari, a veteran ruling party lawmaker, told Reuters on Wednesday.

“Basically, Japan’s economy isn’t in a condition where the Bank of Japan (BOJ) can exit” ultra-loose monetary policy, said Amari, a former industry minister who played a key role in designing former premier Shinzo Abe’s “Abenomics” stimulus policies.

“When stripping away the effect of one-off factors like energy and fresh food, we’re not seeing inflation stably move up around 2%,” Amari said, adding that raising interest rates now would hurt the country’s still fragile economy.

Amari also said there was no need to amend the current policy statement signed between the government and the BOJ, under which the central bank pledges to achieve 2% inflation at the earliest date possible.

“There are some people who say it’s sufficient to target 1% inflation because 2% inflation cannot be achieved. But 2% inflation is a global standard. In the global world of central banking, inflation target means targeting 2%,” Amari said.

Amari’s comments came as Prime Minister Fumio Kishida’s administration intensifies its search for a new BOJ governor to succeed incumbent Haruhiko Kuroda, whose second, five-year term ends in April.

With inflation now exceeding 2% and critics saying the BOJ’s massive bond buying is distorting market function, many market players expect the BOJ to raise interest rates under Kuroda’s successor.

Sources have told Reuters the government would also consider revising the joint statement with the BOJ after a new central bank governor was chosen, as recent rises in inflation have made the current statement’s focus on ending deflation out of date.

(Reporting by Kiyoshi Takenaka; Writing by Leika Kihara; Editing by Alex Richardson)