'Too Early' for Further BOJ Stimulus, Abe Aide Shibayama Says

Masahiko Shibayama

Masahiko Shibayama.

Photographer: Takaaki Iwabu/Bloomberg
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It’s too soon for the Bank of Japan to take further stimulus measures because the rout in the stock market may be temporary and its causes aren’t domestic, an aide to Prime Minister Shinzo Abe said Thursday.

“If you ask whether now is the time to act, I think it is still too early to make that decision,” ruling Liberal Democratic Party lawmaker Masahiko Shibayama, who serves as a special advisor to Abe, said in an interview in Tokyo Thursday. “I think we still have time to evaluate the situation.”

Back in October, in the run-up to a BOJ meeting in which policy makers were widely seen as facing a close call on whether to expand stimulus, Shibayama had said it “wouldn’t be strange” if the central bank had stepped things up. The BOJ left its policy unchanged at that meeting.

Now, with concerns about China’s slowdown affecting global markets, including Japan’s, it would make more sense at this stage to consider a coordinated approach to the challenges than for the BOJ to act on its own, according to Shibayama.

“For the time being I think we should deal with it by closely monitoring the situation and exchanging information with the financial authorities of other countries,” he said.

Shibayama spoke as BOJ board members prepare for another challenging policy meeting next week. With a slide in oil prices and increasing disappointment at subdued wage increases, the central bankis poised to postpone the time frame for reaching its 2 percent inflation target at the Jan. 28-29 meeting. That would be the third time in less than a year that it’s done so.

Pace of Inflation

Evidence of waning expectations for the pace of inflation over the longer term among companies and investors is undermining the campaign being waged by BOJ Governor Haruhiko Kuroda and Abe to break what they term Japan’s “deflationary mindset.” Gains in the yen in the past month and the Japanese stock market’s tumble this week into bear-market territory risk undercutting any appetite among businesses to strengthen domestic investment and pay raises.

In the view of one Abe aide, the conditions are now in place for the BOJ to expand its monetary stimulus, the Wall Street Journal reported earlier. The newspaper didn’t identify the person, and Shibayama said “I am not sure” that the person’s view represents the consensus of Abe’s Cabinet.

“Secretary Suga and Abe and also Mr. Amari, all of those members, are insisting that Japanese fundamentals are still stable,” Shibayama said, referring to Chief Cabinet Secretary Yoshihide Suga and Economy Minister Akira Amari. “Probably their attitude will not change in a very short period, especially a couple of days.”

Shibayama also expressed the view that the underlying trend in the currency markets remains toward a weak yen and that the negative effects of a weaker currency on small, domestic companies should be taken into account when deciding whether to deploy what he called the “Kuroda bazooka.”

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