Japan Leader Urges Swift Action From Central Bank

Japan's Prime Minister Shinzo Abe
Bloomberg | Getty Images
Japan's Prime Minister Shinzo Abe

Japanese Prime Minister Shinzo Abe, vowing to overcome what he called an economic crisis facing the nation, urged the Bank of Japan (BOJ) on Monday to hit its inflation target as soon as possible, keeping up pressure on the central bank to make good its promise of bolder action to overcome deflation.

In his first policy speech to parliament since returning to office last month, Abe - in a clear reference to a feud with China - also promised to "firmly protect" Japan's lands, seas and air space while strengthening ties with the United States.

Abe has made reviving the stagnant economy with a mix of hyper-easy monetary policy and fiscal spending his top priority since his Liberal Democratic Party (LDP) returned to power with a huge election win in December. The push is helping him gain support from more than two-thirds of Japanese voters after one month in office, a Nikkei business daily poll showed on Monday.

Last week, bowing to intense government pressure, the BOJ doubled its inflation target to 2 percent, made an open-ended commitment to buy assets, and issued a joint statement with the government promising to meet the price goal at the earliest possible time.

"It is important for the government and the BOJ to implement the content of the joint statement with their own responsibility, including swift achievement of the 2 percent inflation target on the part of the BOJ," Abe said.

"Japan cannot beat deflation and the strong yen if we respond in the same way as in the past. That's why I present a bolder policy package," he said, starting a 150-day session of parliament, his handling of which is key to whether the LDP can win a July upper house election and Abe last longer than his revolving-door predecessors.

Citing economic revival as the most pressing task for Japan, Abe vowed to map out a growth strategy to boost private investment and consumption, after rolling out $117 billion in spending in the biggest stimulus since the global financial crisis.

Fiscal Reform, Protecting Sovereignty

"We cannot keep expanding fiscal spending forever...We aim to bring the primary balance into the black in order to achieve fiscal reform in the medium to long term," he said referring to a budget balance excluding debt servicing and bond sales income.

The hawkish 58-year-old grandson of a prime minister also has a long-term agenda that includes loosening the limits of Japan's pacifist constitution on the military while restoring a sense of national pride, although he made no specific reference to altering the U.S.-drafted charter in his speech.

"The source of my resolve to devote myself again to the nation and people is my deep sense of patriotism," said Abe, who abruptly ended a 2006-2007 term when he quit, citing ill health.

(Read More: South Korea Stands to Gain as 'Abenomics' Hits Yen)

Abe said he was determined to bolster the U.S.-Japan security alliance at a meeting with President Barack Obama scheduled for the third week of February, calling that alliance the pillar of Japan's diplomacy.

Cracks in the alliance have encouraged other countries to take provocative action against Japan's territories, waters and airspace, Abe said, without naming any countries specifically.

Besides the row with China over islands in the East China Sea, Tokyo is also locked in a territorial feud with Seoul.

"The situation surrounding Japan is becoming increasingly severe," he said. "We'll do our best to enhance proper promotion and management of border islands and strengthen our guard. Here we pledge to firmly protect people's lives and our territories, waters and airspace."

Tensions have mounted in the feud over the East China Sea isles, known as the Senkaku in Japan and the Diaoyu in China since Japan bought them from a private owner in September. In a sign both sides might be trying to calm troubled waters, Chinese Communist Party chief Xi Jinping told Abe's junior coalition partner on Friday he was committed to developing two-way ties.