July 12 (Reuters) – A small opposition party that made a strong showing in Japan’s upper house election, the Your Party, is urging a change in the law to make the Bank of Japan responsible for achieving maximum employment.
Former banking minister Yoshimi Watanabe, who helped form the party last year, said on Monday the change would be part of a bill the party hopes to submit to end deflation in Japan.
Your Party won 10 seats in the upper house in Sunday’s election and could cooperate with the ruling Democratic Party, which suffered a drubbing and lost the majority it held with a small coalition partner. [ID:nTOE66A02V]
The Democrats still control the more powerful lower house. But they will need help from other parties to push bills through the upper house which Prime Minister Naoto Kan seeks to revive the world’s second-biggest economy and reduce massive public debt.
Watanabe told Reuters the proposed change in the BOJ law would be similar to a law governing the U.S. Federal Reserve, which requires it to be mindful of how tight monetary policy can adversely affect the labour market.
Watanabe, who left the then-ruling Liberal Democratic Party last year, said he has no contact with a group of 130 Democrat lawmakers who in April called for the BOJ to weaken the yen to 120 yen to the dollar JPY= and also said his anti-deflation bill would not mention currency levels. [ID:nTOE63C066]
“Targeting a foreign exchange level is not monetary policy,” Watanabe said. “If you increase money supply the yen would weaken, so this is like a back-door strategy.”
The dollar rose 0.5 percent to 89.07 yen on Monday as the upper house election result points to policy gridlock.
Your Party, in its growth strategy, proposes to end deflation by setting an inflation target, extending government loan guarantees to small businesses and then asking the BOJ to buy the debt from commercial banks. (Reporting by Yoshifumi Takemoto. Writing by Stanley White; Editing by Michael Watson)