BOJ weighs policy options

TOKYO: The Bank of Japan (BoJ) is delicately selecting which of Prime Minister Shinzo Abe’s demands for more aggressive monetary easing it can satisfy at next week’s policy review without losing independence to decide objectives and how to achieve them.

Under heat from Abe to take bolder steps to beat deflation, the central bank will double its inflation target to 2% and consider easing policy again most likely through an increase in its 101-trillion-yen (US$1.1 trillion) asset-buying and lending programme, sources have told Reuters.

At the two-day meeting that ends on Tuesday, it is also likely to issue a joint statement with the government pledging to pursue aggressive easing to achieve the new inflation target.

While that may appear to meet most of Abe’s demands, central bankers are lobbying to water down the wording of the statement to preserve flexibility in guiding policy.

The BoJ is also seen holding off on deploying some of the new initiatives under consideration, preferring to save them for later as pressure from Abe is likely to persist.

“I don’t think the BoJ is ready to launch new measures now, or commit to a deadline for achieving 2% inflation,” said Junko Nishioka, chief Japan economist at RBS Securities.

“If so, it really won’t be a huge change for the BoJ,” Nishioka said.

The central bank already defines zero to 2% as desirable long-term price growth, and that it will aim for 1% inflation for the time being.

Expectations that Abe will nudge the BoJ into bolder easing have pushed down the yen by 10% in the past two months and bolstered Tokyo’s Nikkei stock average to a 32-month high. — Reuters