TOKYO Dec 2 Japan's central bank is planning
scenarios for an expansion of its already massive economic
stimulus programme, looking to go beyond its $70 billion-a-month
bond-buying operation, according to officials briefed on the
Options include major purchases of stock market linked funds
or other assets riskier than Japanese government bonds (JGBs),
the insiders said.
More radical ideas are also being floated within the central
bank and among government officials who deal with the BOJ,
including even more aggressive buying up of JGBs - a market
already dominated by the central bank under its existing policy.
"There's no sense that further stimulus is imminent," said
one of these officials, adding the central bank's inflation
target is still a long way off. "There's no harm in thinking
Markets are pencilling in further stimulus from the BOJ
sometime next year on concerns that the economy and inflation
will lose some momentum.
BOJ Governor Haruhiko Kuroda stressed earlier on Monday that
Japan was on course to secure sustainable inflation of 2 percent
in two years, a target set when the central bank announced a
massive burst of money printing in April to double base-money
That has been combined with fiscal stimulus from the
government of Prime Minister Shinzo Abe and the promise of
The policy combination, referred to as the prime minister's
three arrows, has driven the yen down and Tokyo stocks up since
Abe came to power a year ago and spurred the strongest economic
growth among G7 nations in the first half of the year.
However, economic growth slowed sharply in the
July-September quarter and while inflation is its highest in
five-years, it is well below the target and the outlook is
A rise in a national sales tax to 8 percent from 5 percent
in April could also dampen consumption, although the BOJ has
maintained damage to the economy will be limited.
Some policymakers on the BOJ's nine-person board also have
doubts that 2 percent inflation can be achieved in two years.
The BOJ might start to consider fresh stimulus, the
officials with knowledge of BOJ thinking say, if data from July
onwards shows that the tax hike is hitting the economy harder
An abrupt yen rise, say to 95 per dollar from around 102
now, or the outcome of spring wage negotiations and fiscal
considerations could all weigh on BOJ policy decisions next
year, these officials say.
One official briefed on the process said any further easing
could focus more on quality than quantity - taking up more risk
rather than simply bolstering the size of purchases.
"It's hard to exceed in size what the BOJ delivered in
April," this person said. "There may be a need to shift from the
approach of aiming for the size effect."