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Japan premier ramps up pressure on central bank

Japan’s Prime Minister Shinzo Abe ramped up pressure on the central bank Monday, signalling he may rein in the institution’s independence if it fails to achieve an ambitious inflation target.

Abe — who swept to power in a landslide election win in December — warned that failure by the Bank of Japan to meet the two-percent target could open the door to ‘revising the BoJ law’.

The 58-year-old premier has previously warned that he might change a law guaranteeing the bank’s independence if it didn’t get in line with his prescription for rescuing the limp economy: big spending and aggressive monetary easing.

The BoJ, under pressure from Japan’s conservative government, last month unveiled a plan for unlimited easing and the inflation target, which is aimed at dragging the country out of its long-running deflation.

On Monday, Abe said the bank’s decision to tow the line last month saved it from any legislative changes, but warned that he still expected results.

‘If it cannot responsibly deliver results, we would have to consider revising the BoJ law,’ Abe told parliament.

Japan’s leader added that governments and central banks in Europe and elsewhere have previously agreed on inflation targeting.

For months, Abe attacked the bank over what he derided as a timid approach to reviving the world’s third-largest economy.

Bank Governor Masaaki Shirakawa, who butted heads with Abe on policy matters, is to step down next month, several weeks before the official end of his term.

Threats to the BoJ’s independence have come in for criticism, with German central bank chief Jens Weidmann last month deriding Tokyo’s moves as ‘disturbing abuses’.

Many central banks of major industrialised countries were granted independence from government control in the 1970s and 1980s.