BOJ Is Said to See Little Immediate Need for Adding Stimulus

  • Board members gather for next policy meeting Oct. 6-7
  • Officials want the chance to observe more economic data

Bank of Japan officials see little need for an immediate expansion of monetary stimulus and would prefer to hold off to get a clearer picture of the economic outlook, according to people familiar with their deliberations. 

Board members who gather for a policy meeting Oct. 6-7 want the opportunity to observe further economic data and developments in financial markets at home and abroad, according to the people, who asked not to be named because talks are private.

With strong corporate profits and a tight labor market, officials at the bank still see a virtuous economic cycle taking root in Japan, said some of the people. Inflation, excluding the impact of falling energy prices is rising, giving more breathing room to keep watching the trend, they said.

A host of economic releases are due between Oct. 7 and a later central bank meeting on Oct. 30, when Governor Haruhiko Kuroda is due to provide an update on the BOJ’s outlook for economic growth and inflation. The data include August figures for machine orders and current account, trade numbers for September and readings for that month’s industrial production and retail sales.

The consumer price index for September isn’t due until Oct. 30. In August, the BOJ’s preferred gauge that strips out fresh food slipped 0.1 percent. Excluding food and energy, prices rose 0.8 percent.

Currency markets

The yen reversed earlier declines, strengthening to 119.81 per dollar at 8:45 p.m. in Tokyo. The currency has weakened 22 percent since Kuroda began his stimulus program in April 2013.

Economic figures this week provided a mixed picture. Industrial production data out Wednesday showed an unexpected decline in August from the previous month, prompting some market economists to say gross domestic product may have contracted in the three months ended September, tipping the nation back into recession.

Among analysts polled earlier last month, none said the BOJ would boost stimulus on Oct. 7 while 11 pointed to a move on Oct. 30. Nine projected a policy change next year and 13 didn’t expect any change at all.

The output data changed the view at JPMorgan Securities in Tokyo, with economist Masaaki Kanno on Wednesday bringing forward his forecast for the next BOJ move to Oct. 30 from early next year.

The BOJ’s Tankan survey on Thursday registered a weakening in sentiment among large manufacturers, while some analysts pointed to positive signs in confidence from non-manufacturers and plans for businesses to increase investment.

Kuroda, who was handpicked by Prime Minister Shinzo Abe to help beat deflation and reinvigorate the economy, launched an asset purchase plan of unprecedented proportion in 2013. He caught many analysts and investors off-guard in October last year with an expansion of the program.

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