Frontrunner In Japanese Election Walking Back Comments On Quantitative Easing

Japan Shinzo Abe

Photo: AP

Shinzo Abe, leader of Japan’s Liberal Democratic Party and candidate for Prime Minister in the upcoming December election, has made headlines for his call that the BoJ should pursue unlimited monetary easing until inflation is at 2 per cent.  This was widely seen as a potential threat to the BoJ’s autonomy – and was interpreted positively by the markets. Mure Dickie of the Financial Times reports:

Mr Abe’s comments helped push the yen to a six-month low of Y80.75 to the dollar on Thursday, a slide that boosted exporters’ hopes and helped lift the Nikkei 225 index 1.9 per cent.

Just two weeks later, Abe has backed away from his original position. During a debate, he claimed, “If I become prime minister, I will not comment on specific monetary policy measures, which should be decided by the Bank of Japan. I am commenting on specific measures because I am in opposition,”

Perhaps Abe’s comments were intended to moderate his position in front of the Japanese electorate.

But Abe has run on a platform that’s very heavy on monetary policy – and spurred Morgan Stanley to title its FX outlook: “2013: The Year Of JPY Weakness.” If Abe isn’t as committed to monetary easing as he has previously indicated, that view might be called into question.

Abe’s party currently leads by 8 points in an opinion poll conducted by the Nikkei daily.

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