Abe pledges to make BOJ buy construction bonds

Abe pledges to make BOJ buy bonds

Shinzo Abe said he would consider making the Bank of Japan purchase construction bonds directly from the government to tame chronic deflation if his Liberal Democratic Party wins …
… also said he would appoint as the central bank’s next governor someone who agrees with his proposed annual inflation target of 2 to 3 percent. BOJ Gov. Masaaki Shirakawa’s term of office is set to expire next April.
“We would carry out necessary public investment and have the BOJ purchase construction bonds to forcibly put money in the market,” Abe said … “We would take fiscal policy steps as well as monetary policy measures to overcome deflation at an early time.”

The fiscal law prohibits the central bank from underwriting government-issued bonds. Any purchases of construction bonds by the BOJ could be considered tantamount to the bank financing fiscal deficits, and could thus cause interest rates to spike.

Prime Minister Yoshihiko Noda has criticized Abe for threatening to undermine the BOJ’s independence

Recap from the Japan Times.