Photographer: Kiyoshi Ota/Bloomberg

BOJ Officials Are Said to Want Government to Do More for Growth

  • Bank of Japan will hold policy meeting on April 27-28
  • Slim majority of economists predict more BOJ stimulus

With the challenges to Japan mounting, an increasing number of officials at the central bank consider it’s time for the government to do more to spur economic expansion, according to people familiar with discussions at the BOJ.

While most of the officials are concerned that the Abe administration needs to accelerate reforms to raise Japan’s potential growth rate, some also suggest more fiscal spending would help, said the people, who asked not to be named as the talks are private.

The BOJ policy board will wait for the outcome of a U.S. Federal Reserve meeting, watch markets and examine a slew of domestic economic data to be released Thursday morning before making any decision to adjust their record stimulus program, according to the people. A slim majority of analysts surveyed by Bloomberg predicts action from the BOJ at its April 27-28 meeting.

The desire inside the BOJ for the Abe administration to do more is consistent with public comments from Governor Haruhiko Kuroda and calls by Group of 20 nations for governments to take up more of the burden carried by central banks. As recently as April 13, Kuroda said that “tackling deflation is not a choice between monetary policy or a growth strategy: both are necessary.”

‘Sounding Concerned’

“BOJ officials are increasingly sounding concerned about Japan’s potential growth,” said Yoshiki Shinke, a chief economist at Dai-ichi Life Research Institute. “They know that monetary policy can make more impact if Japan’s economy is stronger.”

The BOJ estimates Japan’s potential growth rate is “around 0.5 percent or lower.” With little resilience in the economy, gross domestic product has swung between contraction and expansion in recent years. The economy grew 0.5 percent in 2015, and is forecast to do the same again this year. 

More fiscal spending is the subject of much debate and speculation in Tokyo. Ruling party lawmaker Kozo Yamamoto has called for issuing 20 trillion yen ($180 billion) of Japanese government bonds to aid disaster recovery in the wake of a deadly earthquake in Kumamoto this month. Abe ordered his ministers to compile an extra budget for reconstruction from the quake, and also to front-load existing spending.

Worries about the potential impact on inflation from a strengthening exchange rate are escalating at the BOJ ahead of the policy meeting, according to people familiar with central bank’s discussions. Also being talked about is the possibility of helping financial institutions by offering a negative rate on some loans, according to people familiar with talks.

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