Aso hints at negative stance over BOJ’s further easing

The BOJ is expected to lower its price estimates in its economic outlook report to be adopted at the Friday meeting, taking the current economic and price conditions into account.

They are clinging to hopes that Japan’s economy will emerge from the doldrums next year as global demand for its exports pick up and accelerate inflation toward the BOJ’s target.

“Aso’s comments suggest that he basically stands up for Kuroda and the Abe government isn’t pressing the BOJ to ease further at the moment”, said Hiroaki Muto, chief economist at Tokai Tokyo Research Center Co.in Tokyo.

Aso said last week that it was unlikely the central bank would expand easing now. We’ll see if this adds pressure on the Bank of Japan, who again meets next week.

With Japan flirting with recession due to weak exports, the BOJ’s twice-yearly report will likely cut its growth and price forecasts for the fiscal year that began in April.

For fiscal 2016, the bank now expects the core CPI to post a year-on-year rise of 1.9 percent, which represents the median forecast among the nine Policy Board members.

Finance Minister Taro Aso voiced caution about the merits of further stimulus by the Bank of Japan, saying that monetary policy alone could not achieve its 2 per cent inflation target. “It is hard to achieve the BOJ-set 2 percent inflation goal only through monetary easing”, he said.

Aso said it is “difficult” to raise consumer prices only with monetary easing when crude oil prices have declined significantly, while pointing to the need for companies to use retained profits for wage increases to stimulate consumption.

A series of data due this week may hold the key to the BOJ’s policy decision. Many analysts say growth may not rebound much in the current quarter if the pain from China’s slowdown persists. “The BOJ is expected to decide on additional easing at the Friday meeting”, Muguruma said.

Etsuro Honda, a leading economic adviser to Prime Minister Shinzo Abe, also said there was no need for the BOJ to ease policy further now, Kyodo newsagency reported on Friday.