Shinzo Abe, Japan’s principle leader of the opposition, who is all set to come out with flying colors in the December elections, has called for an unlimited money printing exercise in order to try and achieve a steep inflation target. Although Abe has not specified a target as yet, he has asked the Bank of Japan to achieve an inflation rate of 3% ,which is almost thrice the present target levels. It is a known fact that Japan has been battling deflation pressures for years!
Abe’s remarks have undoubtedly imposed fresh pressures on the bank authorities. It also comes ahead of its rate review program planned next week. This two-day program has been planned for policymakers to debate the requirement of more economic support in a bid to uplift the fortunes of the economy, which is already in recession. The economy has exhibited a negative growth of 0.9% in the quarter ending September and analysts expect a further shrinkage in the current quarter.
In a news conference, Abe went on to state that it was imperative for the Bank of Japan to set fresh inflation targets and embark upon a money printing exercise to achieve it. This way it will be following the footsteps of the ECB and Fed. According to Abe, this was the only step that would help BOJ to have significant impact on the failing markets. His comments came after PM Noda declared that he was prepared for dissolving the lower house of the parliament this Friday. This naturally paved the way for fresh elections in the coming month.

In his statement, Abe suggested that there needs be complete policy coordination between the BOJ and the government. He also stated that if he assumes power, he would be considering a revision of laws governing the BOJ, making it a body independent from political interference in the process. He also suggested that the fresh government needs to compile a supplementary budget. Spending on public works need to be increased and steps that boost the economy needs to be prioritized above those meant for regulating the current fiscal.

As Noda suggested a snap election round the corner, government bonds hit an all time high. Subsequently, the currency weakened since the markets predicted a win for Abe who would certainly pressurize the central bank for an ease in policy. Several traders have been expecting that BOJ would do away with a policy ease the following week and protect its limited policy strengths for the coming month when it is likely to be able to access more data for clearer perspectives about the downturn.

However, the BOJ might revise its perspective on the economic assessment even post policies are eased through September and October. With the rate of interests at zero, the bank has put in a fund pool for purchasing assets that range from corporate debt to government bonds. This has boosted the lending and asset purchasing program by a whopping ¥91 trillion as of October 30, 2012.