Japan Deflation Panel Lays Out Plan

By ALEXANDER MARTIN

TOKYO—The Japanese government's anti-deflation panel called for the Bank of Japan to continue with strong easing measures until the nation pulls itself out of its deflationary state.

Presenting a series of proposals it agreed upon for fighting deflation and tackling the strong yen, the panel called for the government to work closely with the central bank to ensure a stable rise in prices and achieve average nominal growth of 3% and real growth of 2% in the economy by fiscal 2020.

It also called on the government to take decisive measures against currency-market volatility, if necessary—possibly indicating a more forthright stance on intervention as the panel beefed up its proposals relating to the strong yen at the last minute.

The proposed measures will be included in a government revitalization strategy due to be put together by the end of the month.

"The Bank of Japan, for the time being, says it will promote strong monetary easing to achieve a 1% inflation goal," the proposals said. "The government expects the Bank of Japan to continue implementing strong monetary easing until deflation is overcome."

In the proposals the panel declared that excessive volatility in the foreign exchange market has an adverse effect on economic and financial stability, giving the example of sudden rises in the yen. The proposals said the government would closely monitor such movements in the market and would take decisive measures when necessary.

The proposals had called for "appropriate" and "timely" measures, but the wording was strengthened during Tuesday's meeting at the request of a panel member, a government official said.

The official explained the that in demanding the stronger wording, former trade and Industry Minister Masayuki Naoshima said that the response to the high yen was a very important matter and that the current level of the yen is excessively strong.

The BOJ begins a two-day policy-setting meeting Wednesday at which the central bank is expected to leave its policy unchanged amid recent positive signs in the Japanese economy.

However, lawmakers and officials have also been calling on the BOJ to consider taking additional easing steps as recent price data suggest that an end to the nation's deflationary trend is still some way off.

In February, the BOJ set an annual inflation rate of 1% as a near-term goal and clarified that it was committed to monetary easing until that goal was in sight.