BOJ set to refrain from easing, extend loan scheme

Sun Mar 11, 2012 10:18pm EDT
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By Leika Kihara

TOKYO (Reuters) - The Bank of Japan is expected to refrain from further policy easing at its two-day meeting that starts on Monday, while stressing its readiness to act again in coming months if needed and extending a cheap loan line supporting growth industries.

There is a slim chance the board may debate loosening policy for the second month in a row, with some lawmakers calling for another "big bang" after last month's surprise easing, hoping it would boost stock prices as companies close their books in March.

But the BOJ feels it has done enough for now, with the yen at 9-1/2-month lows, stocks up and euro zone debt jitters receding, sources familiar with the central bank's thinking say.

For the time being, central bankers hopes the loan scheme extension and reaffirmed easing bias will be enough to defuse political pressure for more action, they say.

"Having just eased last month, it would be hard to justify moving again. We expect the BOJ to ease again when the U.S. Federal Reserve boosts monetary stimulus," said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo.


The central bank surprised markets last month by boosting asset purchases by 10 trillion yen ($121 billion) and responded to politicians' calls for more vigorous efforts to pull Japan out of deflation by setting a 1 percent inflation goal.

Last month's easing has been so successful in weakening the yen and bolstering share prices that some lawmakers want more. Having set a specific inflation goal, the central bank remains vulnerable to such calls as long as consumer prices stay steady.   Continued...

A man walks past the Bank of Japan headquarters in Tokyo February 14, 2012. REUTERS/Toru Hanai