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BOJ Failure to Ease Tomorrow Would Be Disaster, Mizuno Says

A pedestrian walks past the Bank of Japan headquarters in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg
A pedestrian walks past the Bank of Japan headquarters in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

April 26 (Bloomberg) -- Any failure by the Bank of Japan to expand its asset-purchase program at tomorrow’s board meeting would sow confusion over its policy, a former policy maker said.

Inaction “would be a disaster for communication,” Atsushi Mizuno, who served on the Bank of Japan board from 2004 to 2009, said in an interview yesterday in Tokyo. All 14 economists surveyed by Bloomberg News before tomorrow’s gathering predict Governor Masaaki Shirakawa and his colleagues will boost asset purchases amid forecasts for growth to slow through the year.

Mizuno, now a managing director at Credit Suisse, said more important than the size of added stimulus tomorrow will be greater clarity on its policy objectives. Even as the BOJ has pledged to keep monetary stimulus until price stability is achieved, Shirakawa has warned in speeches in recent weeks that keeping excess stimulus in place too long raises the danger of financial imbalances.

The former central banker also said that credit extended to large Japanese companies poses a greater danger to the nation’s banks than a sell-off in government bonds.

“For the Japanese private banks, the biggest difficulty is exposure to Japanese companies,” with industries including electronics facing a slump in competitiveness, he said.

Merger Need

Mizuno’s assessment contrasts with a focus among policy makers on risks tied to the world’s largest public debt load, with Prime Minister Yoshihiko Noda aiming to double the national sales tax. Along with fiscal discipline and monetary stimulus, the nation needs a strategy for growth and would benefit from mergers that produce more competitive companies, Mizuno said.

Sony Corp., Panasonic Corp. and Sharp Corp. have blamed a strong yen for undermining their businesses as South Korean competitors such as Samsung Electronics Co. benefit from a relatively cheaper currency. The yen has climbed 47 percent against the dollar in the past five years, compared with the Korean won’s 18 percent slide.

Shirakawa’s ability to sway the yen is limited, because the impact of U.S. economic developments is a greater determinant of the exchange rate against the dollar, according to Mizuno, 52.

“In the very short term, the BOJ can have an impact,” he said. “It’s very difficult for the BOJ to choose not to do anything. If they don’t act at all, they will leave massive confusion in the future.”

Shirakawa and his colleagues in February set a goal of achieving sustained 1 percent increases in consumer prices, which would bring an end to deflation that became entrenched in the late 1990s. The so-called core gauge of consumer prices, which excludes fresh food, rose 0.1 percent in February from a year before.

Economists are divided on whether the BOJ will add 5 trillion yen ($61 billion) or 10 trillion in asset purchases this week.

To contact the reporters on this story: Toru Fujioka in Tokyo at; Masahiro Hidaka in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at

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