* BOJ braces for new governor in shift to bolder policy
* Expectations high for easing at next month's meeting
* Outgoing Shirakawa warns about relying on inflation
By Stanley White and Tetsushi Kajimoto
TOKYO, March 7 The Bank of Japan board kept its
policy unchanged on Thursday and voted down a proposal to step
up monetary stimulus, saving ammunition for new leaders who are
expected to take bolder action to try to end nearly two decades
Investors say action is likely to come at the BOJ's next
meeting on April 3-4, when Asian Development Bank President
Haruhiko Kuroda, a vocal advocate of aggressive easing, is
expected to have taken over as governor.
At this week's meeting, BOJ board member Sayuri Shirai
proposed bringing forward open-ended government debt purchases
planned for next year. While she was voted down 8-1, her
proposal was seen as a harbinger of the changes coming to
"Today's decision came as no surprise, but the fact that
Shirai proposed bringing forward open-ended JGB purchases has
laid the groundwork for further monetary easing at the bank's
next policy review under the new leadership," said Junko
Nishioka, chief Japan economist at RBS Securities.
"Even though the proposal was rejected today, it could be
put forward again at the next policy meeting in April and
adopted given that BOJ governor nominee Kuroda has floated a
similar idea in parliament."
The BOJ revised up its assessment of the economy, saying it
was bottoming out, which was slightly more positive than last
month's view that the economy appeared "to have hit bottom."
The policy meeting was the last for Governor Masaaki
Shirakawa and his two deputies. They leave on March 19 after a
five-year term spent battling crises including the aftermath of
Lehman Brothers' collapse in 2008 and the devastating March 2011
earthquake in Japan.
Shirakawa challenged Kuroda's argument that the central bank
needed to focus more on fostering inflation expectations to end
deflation, saying the best way to achieve inflation was for
rising wages to accompany increased growth expectations.
"In the case where we rely mostly on inflation expectation,
this would prompt a rise in government bond yields, reducing the
price of JGBs held by financial institutions and thereby hurting
the financial system," Shirakawa told a media conference.
"If wage hikes come first, this would squeeze corporate
profits and therefore unlikely lead to sustained recovery in
At the meeting, board member Ryuzo Miyao proposed continuing
the BOJ's policy of keeping interest rates virtually at zero
until the central bank's target of 2 percent inflation is in
sight. His proposal was also voted down 8-1.
"We may see more meeting results of split votes under the
new BOJ governor," said Yuichi Kodama, chief economist at Meiji
Yasuda Life Insurance.
"Current board members have not necessarily been aggressive
towards easing, and it is hard to consider all of them will
suddenly change their stance. But given the new BOJ leadership
will have a more reflationary stance, the pace of monetary
easing will likely speed up."
The revision to the economic assessment is unlikely to
relieve pressure on the BOJ's new management to come up with
more innovative ways to end deflation.
Facing relentless pressure from new Prime Minister Shinzo
Abe for bolder efforts to revive the economy, the BOJ doubled
its inflation target to 2 percent in January and made an
open-ended pledge to buy assets from next year.
Under Shirakawa, the BOJ agreed to buy assets or make loans
totaling 101 trillion yen ($1.08 trillion) by the end of this
year, part of which includes buying government bonds with a
maturity of up to three years.
Abe nominated Kuroda to shake up the BOJ, and parliament is
expect to confirm his appointment later this month. In a
confirmation hearing this week, Kuroda advocated buying
longer-dated Japanese government bonds to help end deflation.
Kuroda said buying longer-dated bonds would better foster
inflation expectations and encourage an escape from deflation.
Abe's push for bolder monetary stimulus has helped weaken
the yen to a near three-year low against the dollar, giving the
export-reliant economy some relief and the BOJ some breathing