|
 Amari also said that while Japan appears to be emerging from years
of persistent price declines, it was too early to formally declare a
sustained end to deflation with the economic recovery still
vulnerable to external shocks.
"The BOJ has expressed strong determination that it won't hesitate
to take further action if (the timing for meeting the inflation
target) is not on schedule," Amari said in an interview at a Reuters
Newsmaker event on Friday.
"If the BOJ judges that it's not on schedule, I think the central
bank will decide on its own (to act)," he said.
The central bank has kept policy unchanged since deploying an
intense burst of monetary stimulus in April last year, when it
pledged to double base money via aggressive asset purchases to
accelerate inflation to 2 percent in roughly two years.
With Japan only halfway to meeting that target, the BOJ is set to
keep its stimulus plan intact well into next year, in contrast to
its U.S. and British counterparts, which are starting to telegraph
plans for interest rate hikes.
But BOJ officials have become more comfortable speaking about the
chance of a future exit from quantitative easing (QE). They have
also shown no intention of expanding stimulus any time soon on their
conviction that Japan is making steady progress in meeting the price
goal.
Amari said Japan was no longer suffering from price declines, with
inflation steadily accelerating. But he warned against complacency,
saying he wanted more evidence that the economic recovery is strong
enough to sustainably push up prices.
"The BOJ is striving to achieve 2 percent inflation in roughly two
years. We can't declare that deflation has been eradicated unless
inflation stays at that level and there are assurances it won't ease
(back to deflation) even if the economy is hit by some external
shocks," he said.
Core consumer inflation hit 1.4 percent in the year to May,
excluding the effect of an April 1 sales tax hike. The BOJ expects
inflation to slow to near 1 percent in coming months as the boost
from a weak yen fades, before accelerating toward 2 percent through
early next year.
Many private economists still expect the BOJ's next move to be an
expansion of, not an exit from, stimulus, as they doubt the price
goal can be met within the bank's target timeframe.
With BOJ Governor Haruhiko Kuroda repeatedly voicing confidence of
meeting the price goal, however, most analysts expect the bank to
hold off on further easing at least until October.
RECOVERY ON TRACK
Japan's economy has shown signs of revival since Prime Minister
Shinzo Abe took office 19 months ago, pledging to end deflation and
generate sustainable growth with a triple-pronged strategy he called
his "Three Arrows."
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The first two arrows of massive fiscal and monetary stimulus have
helped lift stock prices and weaken the yen, brightening business
sentiment and boosting exporters' revenues.
Amari was charged with crafting the third arrow measures to boost
Japan's growth potential, the latest of which was unveiled last
month and included steps such as phased-in corporate tax cuts to
lure more overseas companies into investing in Japan.
In the interview, he laid out details of his plan to cut the
corporate tax rate - among the highest in the world at above 35
percent - to less than 30 percent over several years.
From next fiscal year starting in April, the government is aiming to
cut the corporate tax rate by about 6 percentage points over five
years, which could turn out to be a 1.1 or 1.2 percentage point cut
each year, he said.
Policymakers hope that such steps would put the economy on a
sustained recovery, and encourage companies to boost wages and
capital expenditure instead of sitting on huge piles of cash.
Recent data, however, has cast doubt on whether capital expenditure
will increase enough to act as a driver of growth.
The BOJ's "tankan" survey showed companies are planning solid rises
in capital spending. But machinery orders tumbled by a record margin
in May, fueling doubt about whether firms will actually implement
their upbeat spending plans.
Amari was unfazed by the weak machinery orders data, saying that the
economy is set to continue recovering steadily after experiencing
some speed bumps caused by the April tax hike.
(Additional reporting by Yonggi Kang and Stanley White; Editing by
Edmund Klamann & Kim Coghill)
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