BoJ may add to stim­u­lus at March meet­ing: Et­suro

The Pak Banker - - COMPANIES/BOSS -

The Bank of Ja­pan should act pre­emp­tively to change the de­fla­tion­ary mind­set in Ja­pan and this ac­tion could come as soon as March, said Et­suro Honda, an ad­viser to Prime Min­is­ter Shinzo Abe.

"It's pos­si­ble that ex­tra stim­u­lus could come as soon as March," Honda, 61, said in an in­ter­view in Tokyo on Tues­day. "It's vi­tal for the BOJ to pre­emp­tively work to change peo­ple's minds af­ter con­sid­er­ing var­i­ous eco­nomic in­di­ca­tors -not just sit back and fol­low events."

Honda's com­ments were made at a time of in­creas­ing fo­cus on the BOJ's next pol­icy meet­ing on March 14-15, with Bar­clays Plc and JPMor­gan Chase & Co. re­cently say­ing that they see an in­creas­ing chance for fur­ther stim­u­lus then.

While the in­tro­duc­tion of a neg­a­tive rate pol­icy last month has driven down in­ter­est rates and yields, its im­pact on mar­kets has been muted, with the yen strength­en­ing and stocks down. Ja­pan went into re­ces­sion af­ter the last sales tax in­crease in 2014.

Con­sid­er­ing that, the next hike in the levy should be post­poned by two years to April 2019, Honda said. "An­nounc­ing that there would be no tax in­crease un­til prices and em­ploy­ment have sta­bi­lized would have a large pos­i­tive ef­fect" on house­hold sen­ti­ment, he said.

"Cur­rently, the BOJ says it will reach the 2 per­cent price tar­get in the six months from April 2017, which is when the sales tax will be in­creased. And that levy rise would cause in­fla­tion to drop again," Honda said.

"If that hap­pened, there's a chance of peo­ple los­ing trust in Abe­nomics." Honda ac­knowl­edged that the tax can't con­tin­u­ally be post­poned, as it has al­ready been pushed back once to the April 2017 date. "But, I don't want us to make the same mis­takes as be­fore," so rais­ing it in 2019 is the best sce­nario in the cur­rent sit­u­a­tion, he said.

Honda called for an ex­tra bud­get of about five tril­lion yen ($44 bil­lion), say­ing that mea­sures are "strongly needed" to stim­u­late an econ­omy that con­tracted in the last quar­ter of 2015.

"It would be best if we could have an ex­tra bud­get, but there is no time in the par­lia­men­tary sched­ule," he said. "We have to an­nounce some­thing big, to show the govern­ment's re­solve."

Ja­pan passed an ex­tra bud­get last month for the rest of this fis­cal year, which lasts un­til the end of March. Par­lia­ment is cur­rently con­sid­er­ing the bud­get for the next year, which will be a record 96.7 tril­lion yen.

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