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BOJ holds policy meet amid calls for more easing

Elaine Kurtenbach, AP Business Writer

TOKYO (AP) -- Japan's central bank convened a two-day policy meeting Monday that is widely expected to end with fresh measures to stimulate the economy.

The government, meanwhile, lobbied for more action by the Bank of Japan to ease monetary policy to help the recession-struck economy escape from years of falling prices known as deflation.

Trade minister Toshimitsu Motegi told reporters the government is determined that the central bank set a 2 percent target for inflation.

"We want a clear inflation target to aim for," Motegi said. "Other countries have inflation targets, and it's not just 1 percent. They are all at least 2 percent," he said.

Motegi said the monetary easing so far has been "inadequate."

Since taking office in December, Prime Minister Shinzo Abe has pushed ahead with campaign promises to seek a more aggressive approach to ending a deflationary slump that has persisted for two decades.

Apart from trillions of yen (hundreds of billions of dollars) in stimulus spending, the government has insisted the central bank also expand its monetary easing. Since interest rates have been near zero for years, the most likely option is increased asset purchases to help encourage bank lending.

The Abe government is likely to nominate as Bank of Japan governor an expert known to favor its policies when the term of the current governor, Masaaki Shirakawa, ends this spring.

However, Motegi rejected accusations that the government's demands are meant to erode the central bank's independent status.

"We are not doing this to gang up and pick on Mr. Shirakawa," he said. But he added that "the policy of aiming to escape deflation will not change, not today, not tomorrow or the day after tomorrow."

He said the government would leave it up to the central bank to decide what measures to adopt, while insisting something more be done.

Critics of the government's strategy of pushing for more inflation argue that it will do little to stimulate real demand in the economy if it pushes up prices without accompanying gains in purchasing power.