The Bank of Japan still has policy options to continue its unprecedented monetary easing, says Chief Cabinet Secretary Yoshihide Suga, days after the central bank announced it wouldn't expand its main stimulus target.
"I think they still have policies they can pursue," Suga said at his offices in Tokyo when asked about concerns the programme could be reaching its limits. "I am not at all pessimistic about this."
Suga, Prime Minister Shinzo Abe's top aide, said the central bank should continue efforts to achieve its 2 per cent inflation target, and that there is no need to change the law to increase political control over the BoJ, as has been suggested by some lawmakers.
The BoJ now holds more of the country's sovereign debt than any other class of investor, and shrinking trading activity of Japanese government bonds has cast doubt on central bank Governor Haruhiko Kuroda's contention that bond-buying stimulus has no limits.
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Advertise with NZME."It's still technically possible for the BoJ to accelerate its purchase of Japanese government bonds from the market," said Junko Nishioka, at Sumitomo Mitsui Banking Corp in Tokyo.
Whether Abe wants the central bank to ease further depends on the direction of the yen - if the yen weakens further the Government will face criticism over higher prices in the run up to an Upper House election next summer.
The BoJ has announced it would lengthen the average maturities of Japanese government bonds it buys to seven to 12 years from the present seven to 10 years. It also established an additional program to buy 300 billion in exchange-traded funds, targeting companies that invest "proactively in physical and human capital", starting in April 2016.
- Bloomberg
