Japanese political leaders sought to counter a rising tide of expectations today that the Bank of Japan (BoJ) will raise interest rates for the first time in six years next week.
Finance Minister Sadakazu Tanigaki and Chief Cabinet Secretary Shinzo Abe said the BoJ should leave monetary policy unchanged at its policy board meeting on July 13th-14th. A majority of market analysts are forecasting a quarter-point rise.
"At this juncture, the BoJ needs to continue its zero rate policy to support the economy from the monetary side and ensure the economy does not go back into deflation," Mr Tanigaki said.
Mr Abe, who serves as the government's top spokesman, repeated the request later in the day and said he believed that Prime Minister Junichiro Koizumi shared his view.
"I think it is desirable (for the BoJ) to maintain zero rates for a while," he told reporters.
Both Mr Tanigaki and Mr Abe acknowledged that the final decision on interest rates was up to the independent central bank, which has ignored government calls not to tighten credit in the past.
The two were fighting an array of recent signals - including economic indicators, market opinion and even minority views inside the government - that suggest the time is ripe for an interest rate rise.
Speaking to reporters late today, Mr Koizumi said the bank needed to watch deflationary conditions when it decides whether to end zero interest rates.