BOJ Has Little Need to Expand Stimulus Now, Some Officials Say

  • Weaker yen would undermine consumers' purchasing power
  • Kuroda has repeatedly said the BOJ would act if needed

Some officials at the prime minister’s office and the finance ministry see no need now for the Bank of Japan to expand its monetary stimulus program for now amid concern it would harm consumers, according to people with knowledge of talks inside the government.

While the BOJ’s current efforts have yet to realize its 2 percent inflation target, expanding its asset purchases could drive down the yen -- hurting the poor and the elderly, the people said, asking not to be named because the discussions are private. 

The comments are broadly in line with public remarks from Finance Minister Taro Aso, who has said the BOJ was unlikely to expand its efforts for now.

"Declining political appetite for yen weakness may discourage an aggressive action" by the BOJ at Friday’s policy meeting, Barclays Plc analysts said in a research note on Oct. 26 that reiterated their "close call" for additional easing.

The central bank decides monetary policy on Oct. 30, with 16 of 36 economists in a Bloomberg survey forecasting the bank will increase stimulus. Since Governor Haruhiko Kuroda began his unprecedented asset purchases in April 2013, the yen has dropped about 23 percent. 

The finance minister has said he thinks it’s unlikely that the BOJ will expand its monetary policy anytime soon. “At this point, the government is not thinking about anything like that, and probably the Bank of Japan will not undertake additional monetary easing right now,” Aso said in an interview with public broadcaster NHK on Oct. 16.

Etsuro Honda, an adviser to Prime Minister Shinzo Abe, was reported this week as saying that immediate additional easing by central bank is not necessary.

The depreciation of the yen has added to the nation’s import bill, even as oil prices have slumped, and shoppers are feeling the pinch from rising grocery bills.

Households think prices are rising five percent compared with a year ago, according to a survey of 2,014 people conducted by the BOJ in August and September. That compares with overall inflation, which was unchanged in August compared to a year earlier.

Before it's here, it's on the Bloomberg Terminal.