Japan’s Incoming Prime Minister Makes A Clear Threat To Strip The Bank Of Japan Of Its Independence

Shinzo Abe

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The yen has been getting shellacked lately thanks to the ascendancy of Shinzo Abe, the forthcoming PM who has pledged to make the Bank of Japan pursue a 2% inflation target.Japan, of course, has been famously mired in deflation, with the central bank attempting multiple rounds of QE to only mediocre effect.

From Japan Times:

Abe, who has specifically called for a target of at least 2 per cent, issued the warning on a TV program.

“We expect (the BOJ) to discuss it at the next Policy Board meeting” on Jan. 21 and 22, he said of his inflation-busting recommendation.

If the policymakers don’t give in, “we will revise the Bank of Japan law and set (the inflation target) by signing an accord with the BOJ,” Abe said, using veiled language to disguise his threat to strip the central bank of its independence.

This will definitely be one of the biggest economic/monetary policy stories to emerge in 2013: Can Abe actually force such a mandate on the bank, and furthermore, will it work?