TOKYO (Reuters) - The Bank of Japan is unlikely to offer any further monetary easing this year to avoid unwelcome yen falls that would hurt low-income households, one of the architects of Prime Minister Shinzo Abe’s economic policy strategy said on Monday.
With monetary policy already ultra-loose, the government should boost fiscal spending to support private consumption through pay-outs to households, said ruling party lawmaker Kozo Yamamoto.
“If the U.S. Federal Reserve raises interest rates this year, that could accelerate yen declines. That would hurt households” by pushing up imported food costs, Yamamoto said.
“The BOJ will probably stand pat for the rest of this year” to scrutinize how an expected Fed rate hike could affect yen moves, he told Reuters in an interview.
Fed officials have signaled that they could kick off a round of rate hikes in December. Expectations of a Fed rate hike have pushed up the dollar to around 123 yen.
Yamamoto has played a key role in the drafting of Abe’s “Abenomics” stimulus policies of bold monetary easing and flexible fiscal policy.
His latest remarks underscore a growing belief among Abe’s aides that the BOJ has done enough for now, and that further stimulus could do more harm than good by pushing up import costs via a weak yen.
Japan’s economy slipped into recession in July-September as uncertainty over the overseas outlook dampened capital expenditure, keeping policymakers under pressure to take new steps to support a fragile recovery.
($1 = 123 yen)
Editing by Nick Macfie