TOKYO Jan 18 The Bank of Japan will next week
mull scrapping its 0.1 percent floor on short-term interest
rates and pledging to buy assets open-endedly until 2 percent
inflation is foreseen, sources familiar with the central bank's
Such steps would surprise the markets, which have been
expecting the central bank to settle on the more conventional
step of topping up its asset-buying and lending programme by
another 10 trillion yen ($113 billion).
Under relentless pressure from Prime Minister Shinzo Abe for
bolder steps to beat deflation, the central bank is likely to
double its inflation target to 2 percent and consider expanding
monetary stimulus again at its two-day rate review that ends
next Tuesday, sources told Reuters last week.
Instead of topping up the asset-buying and lending programme
again, the BOJ may pledge to buy assets open-endedly until 2
percent inflation is in sight, without setting a specific date
for completing the purchases, the sources said.
Another idea being floated is for the central bank to pledge
that it will keep the balance of its asset-buying and lending
programme intact even beyond its end-2013 deadline, they said.
The BOJ will also consider scrapping the 0.1 percent
interest it pays on excess reserves that financial institutions
park at the central bank, according to the sources, who spoke on
condition of anonymity due to the sensitivity of the matter.
That rate has effectively served as a floor to money market
rates and kept them from falling to zero.