By Natsuko Waki and Emelia Sithole-Matarise
LONDON (Reuters) - Japan's Economy Minister Akira Amari urged China on Wednesday to isolate their economic relationship from politics and make its economic rules clearer and more predictable.
Amari, who is in charge of promoting Prime Minister Shinzo Abe's policy reforms and growth strategy, also said the Bank of Japan played a key role in supporting the country's recovery by trying to achieve its 2 percent inflation target.
Touching on a sensitive topic of Japan-China ties, chilled already by a territorial row and the legacy of Japan's wartime aggression, Amari said Japan has been asking China to separate politics from the economy.
"It's been difficult to do that with China. Even on the Nobel Peace Prize, China puts political spice," he said in London.
"China is the world's second largest economy but rules governing the economy have been extremely opaque and unpredictable. This extreme opaqueness would hinder trade."
Japan is trying to reach agreement with the United States over a deal vital to the Trans-Pacific Partnership, a 12-nation bloc that would extend from Asia to Latin America.
"It's inevitable that China would have to join the TPP ... Amari said. "The TPP can play a major role to eliminate that opaqueness."
The TPP is central to the U.S. policy of expanding its presence in Asia. Japan's Abe has touted it as a main element of his economic growth strategy.
Beijing has said it would consider joining the TPP but Washington wants progress on a bilateral investment treaty first.
UPBEAT ON ECONOMY
Amari said Japan's economy was regaining confidence and economic growth had improved significantly thanks to policy reforms headed by Abe.
"Economic growth has resulted in significant improvement in the labour market. We have witnessed our wage increases gaining momentum, which we haven't seen in recent years," he said.
"The central bank is independent but always collaborating with the government. Its responsibility is to achieve the 2 percent inflation target and it is using whatever tools it has to attain the target independently. The BOJ is playing a role in promoting the recovery."
In April, the BOJ projected for the first time that inflation will exceed 2 percent roughly two years from now, underscoring its conviction that a sustained end to deflation is on the horizon without additional stimulus.
Amari reiterated the government's goal of balancing the budget by the fiscal year of 2020, adding that it is receiving higher corporate tax revenues than it originally anticipated.
Despite such encouraging signs, Japan's primary budget deficit is likely to be at 1.9 percent in the fiscal year to March 2021, meaning it would miss its surplus target without further tax increase and spending cuts.
(Reporting by Natsuko Waki and Emelia Sithole-Materise; Editing by Tom Heneghan)