Japan inflation trend intact, no worry over price goal -vice econmin

[April 28, 2015]  By Tetsushi Kajimoto and Yuko Yoshikawa

TOKYO (Reuters) - The Japanese government shares the Bank of Japan view that the country's inflation trend remains intact, the vice economy minister said, shrugging off concerns over a delay in meeting the central bank's price goal and suggesting there is no immediate need to ease policy.

Yasutoshi Nishimura, speaking ahead of the BOJ's policy-setting meeting on Thursday, said he would not be surprised if the 2 percent inflation target was achieved somewhat later than the BOJ timeframe centering on the current fiscal year to next March.

"That could be within expectations, given that the decline in oil prices was beyond our expectations," Nishimura told Reuters in an interview on Tuesday.

"Taking all that into account, somewhat of a delay would not be a big deal."

Asked if a delay could trigger further monetary stimulus, Nishimura reiterated the government's view that it was up to the BOJ to decide what to do as appropriate.

The central bank is expected to hold off on expanding monetary stimulus on Thursday even though it is likely to trim its inflation forecast for this fiscal year, sources familiar with the central bank's thinking said.

Nishimura, deputy to Economy Minister Akira Amari, regularly attends BOJ policy-setting meetings as the representative of the Cabinet Office, along with another official from the Ministry of Finance. They cannot vote but can convey the government's view.

Nishimura added that Japan's economy was making steady progress towards ending deflation but it would not be an easy victory.

The government needs to watch not just consumer prices but other price indicators, as well as capital spending and whether wage hikes continue next year, in deciding when to declare that deflation has been beaten, Nishimura said.
 

Turning to fiscal policy, Nishimura expressed a sense of crisis about Japan's mammoth debt, which is more than twice its gross domestic product, the highest in the developed world.

Fitch Ratings downgraded Japan's credit rating by one notch on Monday after the government failed to take steps in this fiscal year's budget to offset a delay in increasing the sales tax.

He said Japan should not be complacent with its low bond yields, which reflect monetary easing in Japan and Europe, adding that the government would craft a fiscal consolidation plan and a new growth strategy around the middle of the year.

"Our major mission is to pave the way for structural reform and fiscal consolidation while buying time," he said.

(Editing by Chris Gallagher and Edmund Klamann)

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