BoJ likely to keep on stimulus to support inflation

TOKYO: The Bank of Japan (BoJ) is expected to maintain its massive stimulus programme at a monetary meeting ending on Thursday despite growing signs of improvement in the economy, keeping its money tap wide open to ensure that recovery translates into higher inflation.

BoJ governor Haruhiko Kuroda may signal at his post-meeting news conference that the central bank could raise its yield targets or slow down asset purchases – but only when inflation expectations heighten or the cost of stimulus outweighs the benefits.

With inflation still distant from its 2% target and the selection of Kuroda’s successor looming, the BoJ is in no rush to remove mon- etary support from an economy only just emerging from two decades of deflation.

“Economic and price conditions haven’t changed much in the past few months, so the BoJ probably sees no need to change policy now,” said a source familiar with the bank’s thinking, a view shared by two other sources.

At a two-day meeting ending on Thursday, the BoJ is widely expected to keep its shortterm interest rate target at minus 0.1% and a pledge to guide 10-year bond yields around 0%.

But the board may discuss whether the BoJ should consider raising its yield targets or slow purchases of exchange-traded funds (ETF) next year, analysts say, as some members had recently voiced concern over the demerits of prolonged easing.

Calls from newcomer Goushi Kataoka to increase stimulus to speed up meeting the BoJ’s 2% inflation target has not gained support of other board members who are wary of the rising costs of easy policy.

Another newcomer, former banker Hitoshi Suzuki, has recently said the BoJ may need to raise its yield targets or slow ETF buying in the future.

“There’s a good chance the BoJ will finetune its framework next year,” said Izuru Kato, chief economist at Totan Research. — Bloomberg