Japan government keeps up pressure, BOJ seen on hold

Fri Mar 9, 2012 2:49am EST
 
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By Leika Kihara

TOKYO (Reuters) - Japan's government on Friday kept up pressure on the central bank to further support an economic recovery, but the Bank of Japan appears set to hold monetary policy steady at its regular policy meeting next week.

With market jitters over Greek debt swap talks easing, the yen weakening and share prices rising, the central bank is unlikely to move again after last month's surprise easing, sources familiar with its thinking say.

BOJ officials have signaled that the bank may ease more frequently to beat deflation even when the recovery is on track, leaving some analysts to believe it may respond to calls from politicians for another "big bang" stimulus next week.

But many in the bank feel they have done their part for now and prefer to save their limited policy options for later, unless fresh developments in Europe's debt crisis or a big disappointment in U.S. payrolls data jolt financial markets.

"October-December GDP was revised up and the BOJ may raise its assessment on output. When it sees the outlook brightening, it's hard to justify easing again," said Junko Nishioka, chief economist at RBS Securities Japan.

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BOJ, Fed balance sheets link.reuters.com/nyt65s

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A "Don't Walk" traffic signal is seen in front of the national flag hoisted on the headquarters of Bank of Japan in Tokyo February 8, 2012. REUTERS/Kim Kyung-Hoon