Japan's Abe steps up pressure on central bank

Japan's incoming premier Shinzo Abe stepped up pressure on the Bank of Japan on Sunday to set a two-per cent inflation target, threatening to change a law guaranteeing the bank's independence if it did not agree. Speaking on Fuji Television, Abe said the BoJ's central policy board must back his proposed inflation goal at its next meeting in January. "If unfortunately it refuses to agree to it, we have to amend the BoJ law, reach an accord (between the government and the bank) and we will have the policy," Abe said. The law, called the Bank of Japan Act, spells out the central bank's duties and guarantees its independence. The act also says the bank should work with the government to make sure "its currency and monetary control and the basic stance of the government's economic policy shall be mutually compatible". Abe also said the BoJ should be held responsible for expanding employment, a point he had stressed during his recent election campaign. The hawkish leader of the conservative Liberal Democratic Party is expected to take office on Wednesday, following a landslide victory in national elections last weekend. Abe has already criticised the central bank for not doing more to stoke Japan's economy -- which may have slipped into a recession in the third quarter -- and has advocated "unlimited" easing measures, drawing a mixed response from economists. But the market has welcomed his rhetoric, boosting the Nikkei index at the Tokyo Stock Exchange in recent weeks. The central bank's policy board met on Thursday and expanded an existing asset-buying programme to pump money into the market, but kept interest rates unchanged at between zero and 0.1 per cent. BoJ governor Masaaki Shirakawa told a press conference on Thursday that his board would review their one-per cent inflation goal, but made no direct mention of the two-per cent inflation target.