TOKYO, Feb. 6 (Xinhua) -- Fundamentally strengthening the Japanese economy rather than relying solely on weakening the yen to achieve a 2 percent inflation target is of paramount importance, said Bank of Japan policy board member Takehiro Sato Wednesday.
Along with an increase in prices, Sato also said that wholesale wage increases in Japan would be vital to Japan's economic recovery, but even then he described the central bank's 2 percent inflation target as "challenging."
"At a time when Japan faces rising headwinds such as population aging and population decline, setting the price stability target at 2 percent is rather challenging," the policy board member was quoted by local media as saying at a speech to business leaders in Gunma Prefecture.
Sato said that the recent decline of the yen had lifted markets and prices here commensurately, but re-empahasized his belief that upping wages in Japan would be a predominant factor in the nation' s recovery from its economic doldrums.
"Greater fundamental strength of the economy is needed to generate a wage increase of approximately 4 percent to aim at a 2 percent inflation target," Sato, one of the two BOJ policy board members who had voted against the target last month, said.
Sato previously stated that the 2 percent price stability target could undermine the central bank's reputation if significant headway had yet to be made through the government's own monetary policies and growth strategies.
Sato today urged further cooperation and zeal between the government and the central bank in order to put the nation back on a fundamentally sustainable recovery path, and stressed that simply adhering to previous anachronistic policies would not be enough to achieve this.
Separately, the International Monetary Fund's deputy chief said Wednesday that the central bank's inflation target was set at an appropriate level to effectively tackle deflation, which has constrained the nation's economy for decades.
IMF First Deputy Managing Director David Lipton during a meeting in Tokyo with Japan's economic and fiscal policy minister Akira Amari, heard the latter's talk of the government's gratitude for the IMF's understanding of its recent financial policy initiatives put forward by the ruling Liberal Democratic Party, headed by Shinzo Abe.
Lipton in subsequent talks with Finance Minister Taro Aso said that the IMF is open to providing anti-deflation advice to Japan, but voiced his concern over further debt issuance, considering that Japan's debt currently stands at double the size of its economy and is the highest among industrialized countries.
Lipton said that the IMF is paying close attention to the government's mid-to-long-term monetary and fiscal polices to stimulate the economy and reduce the nation's monumental debt burden, and reiterating IMF Managing Director Christine Lagarde's comments made at the World Economic Forum in Davos last month -- they would like to see concrete plans of exactly how the government here plans to achieve these.