Japan to set 2% inflation target: Reports

TOKYO (AFP) - The Bank of Japan and the nation's new government will jointly set a two per cent inflation target in a bid to fight deflation, news reports said on Monday.

The two sides are to finalise a joint statement on monetary measures in time for the central bank's upcoming policy meeting scheduled for Jan 21 and 22, the Asahi Shimbun reported.

The planned statement is expected to stipulate the two per cent inflation target as a "mid-term" goal so that the central bank's commitment to beating deflation will be clarified, the daily said.

But Kyodo News, quoting government sources, said that their statement would not take the form of a binding accord and no deadline would be set for achieving the target.

In a television interview on Sunday, Prime Minister Shinzo Abe, who took office late December, reiterated his call for the target in an effort to fight deflation that has plagued the world's third largest economy for years.

BoJ governor Masaaki Shirakawa already expressed his readiness to work with the government to tackle the deflation but has so far stopped short of agreeing to the proposed target.

Deflation continues to pose a threat to Japan's recovery as a fall in prices eats into corporate profits, leading firms to slash jobs and put off growth-generating capital investment.

It also hurts demand because it encourages consumers to put off making purchases in the hope of paying less further down the road.

Mr Abe also said during the interview that he would meet financial experts on Tuesday to officially launch procedures in nominating his candidate to succeed Mr Shirakawa whose term will end in April.

Mr Abe said Mr Shirakawa's successor should "be able to carry out monetary measures boldly and agree to our ideas".

Among potential candidates are Mr Haruhiko Kuroda, president of the Asian Development Bank, as well as Mr Toshiro Muto and Mr Kazumasa Iwata, both former deputy BoJ governors, the Nikkei business daily said.

In Japan, the government nominates its candidate to head the nation's central bank but needs parliamentary approval.

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