Here are some notes...
Question: Japan lacks political will and requires BOJ and leadership
Answer: balance sheet problem requires balance sheet adjustment - NPL
We are in deflation - there are many reasons - demand shortage, demand supply gap is not that big - supply side problem may be big. China low wages... we can't stop that.
Deflation is fundamentally a monetary problem. Therefore monetary policy is important. Money supply is too low and we need to increase the money supply. We also have to pay special attention to nature of BOJ. BOJ is indepedent from the government so we are in discussion with them.
Question: BOJ would argue that the money supply need to get into the economy to do any good. Therefore the banking system needs to be fixed for that to happen. That's your job. What are you doing?
Answer: The amount of money being available by BOJ is growning, but the total money supply is low. The reason for the this difference is that the money intermediation process is broken in Japan. This is because of the NPL problem in banking sector. Now we have a very explicit plan to address the NPL. But, the total money supply is the responsibility of the BOJ.
Question: The government is in the position to influence the BOJ. Koizumi has the ability to choose the governor.
Answer: BOJ is independent from the government. The government and the BOJ should share common targets. Japan should be allowed to choose their own implementation tools. The BOJ established a new role three years ago and we are still in the process of developing the realtionship between the government and the BOJ.
Question: What inflation level target would be appropriate to deal with the deflationary problem.
Answer: The inflation target is not that important. The important point is to increase the money supply. BOJ may set a target. If the BOJ decides to increase money supply, then the target will be important.
Question: Yen is increasing when you are hoping that the exchange rate to stimulate the economy. Are you concerned.
Answer: I can't comment directly on the exchange rate. The rate should be set based on supply and demand. The impact of the exchange rate will be over 6 months later so I'm not worried about the short term impact.
Question: Is consumer demand a way to increase money supply.
Answer: Yes. BOJ can purchase assets and this will increase money supply. Banks say there is no need for lending. This is a good way for the BOJ to increase money supply.