INTERVIEW: Ruling Party Anti-Deflation Panel Applauds Latest BOJ Easing

-- The DPJ's planned new anti-deflation panel may remove BOJ policy off its main agenda.
-- A key DPJ lawmaker calls recent BOJ steps excellent.
-- He dismisses the idea of changing the BOJ law as "crazy."

TOKYO (Dow Jones)--A planned ruling party panel looking into ways to end Japan's chronic deflationary problem may cross the central bank's policy off its main agenda, a key member of the panel said, in a sign of how the bank's unexpected loosening of monetary policy earlier this week appeased critics in political circles.

"It's not necessary to call them outrageous when they are doing something good," Yosuke Kondo, a senior Democratic Party of Japan lawmaker, told Dow Jones Newswires in an interview Thursday.

"I think we will probably remove" monetary policy off the key agenda items, Kondo said, praising the Bank of Japan's move earlier this week to "sharply shift" its policy approach by setting a 1% inflation goal for itself and boosting its buying of yen assets to pump more money into the market.

"The BOJ's decision was excellent. It was a very good judgement."

Kondo is one of the four top officials at the new panel to be set up under the DPJ's Policy Research Committee. The panel aims to come up with measures to deal with the yen's strength and Japan's persistent price falls and propose them to the government in the future, he said. It may hold its inaugural session next week and meet once a week from then on, he added.

The remarks by Kondo, currently a senior member of the DPJ project team on growth strategies and economic policy, may relieve some of the recent pressure on the BOJ. Before the bank's move Tuesday, there had been speculation that the new panel might add to already mounting political pressure on the BOJ to act. In fact, "if their stance hadn't changed, we probably would have had to say something very strong to them," Kondo said.

The panel is likely to ask working-level BOJ officials to attend some of its meetings, but the main aim is to gather information, not to put pressure on the bank, he said.

Kondo emphasized that the new DPJ panel isn't a mere BOJ basher but will look for long-term steps to fight deflation, such as ways to encourage consumers to invest more rather than save.

He dismissed a proposal by some DPJ lawmakers to revise the BOJ law to have it do what they want as a "crazy" idea that could rather trigger a "sell-Japan" phenomenon by undermining global confidence in Japanese economic policy. He said he has no intention to bring up currency-market intervention issues at the panel.

But Kondo warned that he will "closely follow up" on the BOJ's pledges, suggesting the panel has the potential to become tougher against central bank officials if they fail to deliver.