BOJ can wait to decide if more easing steps needed, Abe aide

Mon Feb 24, 2014 4:09am EST
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By Kaori Kaneko and Sumio Ito

TOKYO (Reuters) - The Bank of Japan can wait for more data in the summer before it decides whether to ease policy further, a key aide to Prime Minister Shinzo Abe said, indicating the government is not pressing the central bank to immediately bolster the economy.

As the world's third-biggest economy shows signs of slowing momentum ahead of an April 1 rise in the national sales tax, speculation has risen that the BOJ may need to ramp up its already massive purchases of bonds and other assets.

But Koichi Hamada, professor emeritus of economics at Yale University, told Reuters: "My position is rather optimistic that the Bank of Japan should examine the economy closely when economic data reflecting the tax hike come out."

Major economic data showing the impact of the tax increase will begin to trickle out from June and July.

"It is uncertain how serious the negative effect of the sales tax hike will be on the economy," Hamada, one of Abe's economic advisers, said.

The BOJ last week kept its expansionary policy steady but extended and expanded special loan programs to help boost the economy.

Central bank board member Yoshihisa Morimoto said on Thursday that the BOJ need not wait and react to economic data but could be proactive if its economic forecasts appeared to be in jeopardy.

After the April increase in the sale tax to 8 percent from 5 percent, Abe must decide whether to proceed with a planned second hike, to 10 percent. The decision on the October 2015 tax increase is expected late this year.   Continued...

A security guard salutes at the entrance of the Bank of Japan building in Tokyo January 22, 2014. REUTERS/Yuya Shino