JAPAN

JAPAN
Asahi Shimbun, Tokyo, Dec. 19: As signs are growing that the nation's economic health has improved, the focus of economic policy debate is now on the issue of when the central bank should terminate the quantitative monetary easing program it introduced in 2001.
BOJ Gov. Toshihiko Fukui has dropped hints that he wants to discontinue this unorthodox monetary expansion policy around next spring.
Many government and ruling coalition policy-makers, however, argue the time is not ripe for the step.
Fiscal crunch
There are more than economic reasons for these strong reactions of politicians. The termination of the quantitative easing policy would likely lead to a rise in interest rates, and that will not only put a damper on the economy but also further inflate the government's enormous debt-servicing cost. The government's plan to ride out the fiscal crunch depends on spending cuts and the continuation of the easy credit conditions. The BOJ's policy shift could shake the foundation of the government's fiscal management, critics say.
Exchanges between the government and the BOJ are good. But both sides should try to focus on accurately reading the state of the economy instead of making their own cases.
If there is enough evidence that the economy is on a firm footing without being threatened by deflationary forces, then the quantitative expansion program should end.
We urge both the government and the BOJ to ensure that their debate is not influenced by any face-saving instinct.