Bank of Japan's Shirakawa Returns Early to Tokyo Amid Reports of Meeting
Aug. 27 (Bloomberg) -- Derek Halpenny, European head of foreign exchange at Bank of Tokyo-Mitsubishi UFJ, talks about Japanese Prime Minister Naoto Kan's comments that he would be willing to take “bold” action on currencies. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Bank of Japan Governor Masaaki Shirakawa returned to Tokyo yesterday, cutting short a visit to the U.S. following reports the central bank is considering holding an emergency meeting.
Shirakawa decided to return a day early from the U.S., where he was attending a Federal Reserve event in Jackson Hole, Wyoming, central bank spokesman Satoshi Yamaguchi said in Tokyo yesterday, without elaborating.
The central bank may hold a meeting as early as today to discuss policy measures to combat the yen’s advance, Dow Jones reported yesterday, citing people familiar with the situation. Prime Minister Naoto Kan, who is compiling his own stimulus measures to spur growth, said Aug. 27 said he expects the bank to implement policy “swiftly.”
“While the fiscal package has been expected, what is worth noting is that the BOJ is likely to support the government by announcing additional easing measures,” said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo, who worked at the central bank for 25 years. He said the most likely option for the BOJ is to expand its credit program.
The central bank may expand a three-month 0.1 percent loan facility, increasing the supply of funds from 20 trillion yen ($230 billion) or extend the duration of loans to six months, Dow Jones reported.
Slowing Expansion
Kan also said last week he wants to meet Shirakawa as soon as possible after the governor returns from his trip. Finance Minister Yoshihiko Noda also called on the central bank to do more, telling reporters in Beijing on Aug. 28 he “expects” them to come up with more ideas to bolster the nation’s slowing expansion.
Government reports released Aug. 27 showed deflation persisted in July while the labor market improved. Consumer prices excluding fresh food slid 1.1 percent from a year earlier, the 17th straight drop. The unemployment rate fell to 5.2 percent, the first decline in six months.
Pressure on the bank has been mounting since it kept its key overnight lending rate at 0.1 percent and refrained from expanding credit measures at an Aug. 9-10 meeting, days before the yen surged to 83.60 per dollar, the strongest since June 1995.
The Nikkei 225 Stock Average has fallen 5.9 percent since the BOJ’s last meeting, amid signs that global growth is faltering and on concern the yen’s advance may depress growth in an economy that grew at its slowest pace this year last quarter.
“We are ready when necessary to take bold measures” in the currency market, Kan told reporters in Tokyo last week, without elaborating.
To contact the reporter responsible for this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net
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