BOJ Could Add Further Easing If Needed, Yamaguchi Says

The Bank of Japan (8301) could add further stimulus if warranted by economic and price conditions, Deputy Governor Hirohide Yamaguchi said, while rejecting criticism of the impact of the bank’s policies on the yen.

“It could be the case that further accommodation will be pursued,” as the BOJ monitors the economy and prices, Yamaguchi, whose term ends in March, said in a speech in Nagasaki today. He later told reporters that the central bank’s policies aren’t aimed at directly weakening the yen.

The BOJ last week adopted a 2 percent inflation target without a deadline and said it would wait until 2014 to start open-ended asset purchases. Prime Minister Shinzo Abe today urged the bank to reach the target quickly, adding to his calls for more action that have helped weaken the yen more than 12 percent against the dollar in three months.

“This speech shows the BOJ is trying to escape from rising political pressure by signaling its willingness for more action,” said Hideo Kumano, chief economist at Dai-Ichi Life Research Institute in Tokyo and a former central bank official. “The BOJ may have to ease further in the next few months.”

European Central Bank governing council member Jens Weidmann warned this month against “politicizing” the yen exchange rate, and German Chancellor Angela Merkel said “I can’t say I’m completely free of worry when I look at Japan right now,” last week while speaking at the World Economic Forum in Davos.

‘Currency Wars’

“As for talk of currency wars, I want to make it clear that the BOJ doesn’t conduct monetary policy, and didn’t bolster stimulus this time, in an attempt to influence the yen,” Yamaguchi said to reporters after the speech, joining the government in defending Japan’s actions.

“It’s not our way of thinking to aim directly to influence the level of currency,” Yamaguchi said. “Monetary easing naturally makes an indirect impact on foreign exchange rates.”

The yen was trading 0.3 percent higher at 90.85 per dollar at 4:26 p.m. in Tokyo after falling to its lowest since June 2010 this week. The Nikkei 225 Stock Average closed at its highest since April 2010.

Japan’s consumer prices fell 0.2 percent in December, the 17th drop in the last 24 months, suggesting that the economy is still far from sustained price gains.

Dai-Ichi’s Kumano expects that the BOJ may start open-ended asset purchases earlier than the planned January 2014 start date. Currently, the bank buys securities such as government bonds and exchange-traded funds through a fund targeted to reach 76 trillion yen ($837 billion) in assets in December 2013.

Yamaguchi said in his speech that the BOJ will pursue “aggressive monetary easing” as long as it deems appropriate, adding that the bank’s price target is the same as the “flexible inflation targeting” adopted by many central banks.

To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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

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