TOKYO Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe will revive their regular meetings this month, people familiar with the matter said, in a sign the government may be concerned about recent stock market declines and an uptick in the yen.
Kuroda has remained bullish about the outlook for economic recovery and an escape from deflation, but the meeting with Abe could revive expectations of additional stimulus.
However, the sources said the government won't be attempting to pile pressure on the BOJ for more monetary easing, one year after the central bank launched its unprecedented stimulus.
The central bank remains confident that it can meet its 2 percent inflation target by around April next year without resorting to additional monetary easing, a point Kuroda made clear at his news conference last Tuesday.
But the recent selloff in stocks and an uptick in the yen, in part caused by market disappointment over Kuroda's denial of immediate action, has prompted the BOJ to reiterate to markets that it remains ready to act if needed.
"Of course we're making steady progress toward meeting our 2 percent inflation target, but we're only half way through," he told a news conference after attending the G20 finance leaders' gathering on Friday.
"That's why we will continue to steadily proceed (with the current ultra-loose policy) and will adjust monetary policy without hesitation if achievement of our price target is threatened," he said.
The BOJ's efforts to explain its stance come as the central bank felt that markets misinterpreted Kuroda's comments last Tuesday by focusing too narrowly on his denial of immediate action, the sources said on condition of anonymity.
They added that the BOJ remained steadfast in its view that no additional stimulus is needed for now, despite the recent weakness in global markets on jitters over a slowdown in China's economy and tensions in Ukraine.
The monetary stimulus, deployed as part of Abe's reflationary policies last year, helped weaken the yen and revive the export-reliant economy.
However, the yen has bounced 3.4 percent on the dollar so far this year, and Tokyo stocks have retreated 14 percent after soaring over 50 percent in 2013, heightening concerns that falling consumer confidence could derail the economic recovery.
Some aides close to Abe want the BOJ to do more, fretting that this month's increase in the sales tax may hit the economy more than expected and delay an exit from deflation.
But that has not prevailed as the mainstream view in the government yet and the BOJ is barely facing any political pressure, with key members of Abe's cabinet like Economics Minister Akira Amari praising the BOJ for doing "extremely well.
Yasuhisa Shiozaki, a senior ruling party lawmaker, also expressed confidence earlier this month that the BOJ can achieve its price target, adding that expanding stimulus again won't be easy.
The meeting between Abe and Kuroda, the first one to be held this year, is part of the usual practice between the two of discussing economic and market developments every few months, the sources said.
Top government spokesman Yoshihide Suga said on Monday he was not informed of any plan for the two to meet but added that it was "natural" for them to get together.
The BOJ has stood pat since deploying an intense burst of stimulus last April, when it pledged to double base money via aggressive asset purchases to accelerate inflation to 2 percent in roughly two years.
(Reporting by Yoshifumi Takemoto and Leika Kihara)