Kan wants 1% inflation for Japan`s economic recovery

TOKYO, Feb. 16 Kyodo -
A year-on-year price rise of about 1 percent is needed for Japan to defeat
deflation and the government should work closely with the Bank of Japan to that
end, Finance Minister Naoto Kan said Tuesday.
''It's preferable for the government and the BOJ to have a common goal,'' Kan
said during a session of the House of Representatives Budget Committee.
Kan's latest remarks will likely heat up debate over whether the BOJ should
adopt a precise inflation target to overcome continued prices falls in Japan.
The BOJ has projected a rise in consumer prices over the medium to long term,
but it has been reluctant to adopt inflation targeting in part out of fear it
may lose flexibility in operating its monetary policy.
The BOJ said in December that price movements should be regarded as stable when
Japan's key consumer price index is in a positive range of 2 percent or lower,
and the midpoints of most policy board members' understanding are around 1
percent.
Kan said the government and the central bank share the same view over the
appropriate price level, adding, ''I personally think maybe it should be a
little more than (1 percent).''
Given that the consumer price index, excluding volatile fresh food prices, fell
a record 1.3 percent on average in 2009 from a year earlier, some experts
expect that the government may step up its pressure on the BOJ to take
additional monetary easing measures.
However, Kan was careful to avoid giving the impression that the government is
meddling with the BOJ's monetary policy.
He said the BOJ's independence from the government should be respected,
suggesting that how exactly to combat continued price falls has been put in the
hands of the central bank.
==Kyodo