By Leika Kihara
TOKYO, April 8 (Reuters) - Japan must respect central bank independence to prevent unwelcome rises in bond yields, former IMF chief economist Kenneth Rogoff told Prime Minister Sanae Takaichi
at a meeting of the government's top economic council, minutes of the meeting released on Wednesday showed.
Rogoff, who now teaches at Harvard University, made the remark at the council's meeting on March 26, where he was invited to offer his views on Takaichi's economic policies, according to the minutes.
Rogoff said he would not be surprised if long-term Japanese government bond (JGB) yields went up to 3% or even higher in the coming years, given the way governments across the globe were boosting debt-funded spending on areas such as defence, the minutes showed.
Having an institution independent from the government make fiscal projections could help Japan maintain market trust in its finances, he was quoted as saying.
"Central bank independence, however, is even more important," Rogoff said.
"It's precisely when markets are worried that you're doing things to push up interest rates (high deficits) or having to live with higher global interest rates that it can be very problematic if the central bank is perceived as being very subordinate to the government. For that can make long-term interest rates go up even more," he was quoted as saying.
An advocate of loose fiscal and monetary policy, Takaichi and her economic advisers have repeatedly voiced displeasure over the Bank of Japan's plan to raise interest rates from still-low levels.
(Reporting by Leika Kihara; Editing by Kate Mayberry)
