By Leika Kihara
TOKYO, Nov 27 (Reuters) - Japan's opposition leader and possible next prime minister, Shinzo Abe, said on Tuesday the country cannot restore its fiscal health unless deflation is overcome, calling for bolder monetary and fiscal stimulus to revive the economy.
Abe also said that if the government were to set a policy target for the Bank of Japan it would not necessarily be infringing on the central bank's independence, as long as it has freedom to decide on the means for achieving it.
'The government and the BOJ should achieve a policy accord and discuss an inflation target to pursue bold monetary easing. The 1 percent 'goal' already announced by the bank won't do. It must instead be a 'target' of 2 percent,' Abe told a symposium debating Japan's growth strategy.
'Most central banks in the world, except for that of Japan, set policy targets with the government or in response to requests from the government,' he said, reiterating his view that the BOJ should be held accountable not just for achieving price stability but for boosting job growth.
Abe, a former prime minister chosen to again head the Liberal Democratic Party (LDP) in September, is seen as likely next premier after a general election on Dec. 16 that surveys suggest his party will win.
His calls for the central bank to pursue 'unlimited' monetary easing and set a 2 percent inflation target, higher than the BOJ's current 1 percent goal, have pushed down the yen by heightening market expectations of further monetary loosening by the central bank.
In an effort to shift the debate away from the Bank of Japan, its Governor Masaaki Shirakawa repeated his view at a meeting on Oct. 30 that monetary easing alone cannot beat deflation, urging the government to pursue fiscal reform and deregulation to boost domestic investment.
(Reporting by Leika Kihara; Editing by Michael Watson & Kim Coghill) Keywords: JAPAN ECONOMY/LDP ABE
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