BOJ Refrains From Loosening as Analysts See Stimulus in December

The Bank of Japan (8301) held off from monetary easing after expanding asset purchases in September and October, switching the focus to a December meeting where more measures are forecast to shore up a shrinking economy.

The asset fund stayed at 66 trillion yen ($812 billion) and a credit-lending facility was unchanged at 25 trillion yen, the central bank said in Tokyo today after a two-day meeting. All of 22 economists surveyed by Bloomberg News had forecast no change.

Opposition leader Shinzo Abe, the leading contender to become prime minister after a Dec. 16 election, has called for unlimited easing and an increase in the central bank’s inflation goal to as much as 3 percent from 1 percent. His comments last week triggered the biggest two-day decline in the yen against the dollar in a year as investors speculated that more aggressive monetary loosening is looming.

“The BOJ would likely come under increasing pressure,” Chotaro Morita, chief strategist for fixed income at Barclays Plc in Tokyo, said before today’s decision. “The December monetary policy meeting is scheduled to take place after the presumed election date, suggesting pressure for additional easing could exert an influence at an early stage.”

The central bank kept its key interest rate unchanged between zero and 0.1 percent and monthly purchases of government bonds at 1.8 trillion yen, today’s statement showed.

Next Meeting

Attention shifts to a BOJ policy meeting scheduled three days after the election, with 16 economists forecasting easing. The world’s third-largest economy is heading for a technical recession as analysts forecast a 0.4 percent annualized contraction this quarter after a 3.5 percent decline in the three months through September.

The BOJ will next month expand its purchase of Japanese government bonds and treasury bills by 5 trillion yen each, said Izuru Kato, chief market economist in Tokyo at Totan Research Co. Barclays’ Morita said he sees potential for additional stimulus in January or February.

The yen traded at 81.27 per dollar as of 12:16 p.m., after the policy decision, after yesterday touching a seven-month low of 81.59.

Twenty-five percent of respondents in a Nikkei Newspaper poll released yesterday said they favor Abe’s Liberal Democratic Party, while 16 percent chose the ruling Democratic Party of Japan.

Panasonic Corp. (6752), Japan’s second biggest TV maker, plans to cut 8,000 jobs in the second half of this fiscal year as weak global demand and a strong yen hurt profits. Panasonic and Sharp Corp. are among those expecting losses the year ending in March.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net; Masahiro Hidaka in Tokyo at mhidaka@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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