The Bank of Japan (BOJ) should be ready to expand monetary stimulus and intervention is an option if the yen moves excessively, an IMF official said in Tokyo.
“Intervention could be an option,” if yen moves are too large, Naoyuki Shinohara, a deputy managing director, said yesterday. “Japan’s economy has many downside risks, so depending on the circumstances, the BOJ should always be ready to expand quantitative easing.”
The central bank kept its asset-buying fund at ￥20 trillion (US$260 billion) and its credit-lending program at ￥35 trillion on Jan. 24 while cutting its forecast for the nation’s growth. A yen near post World War II highs against the US dollar is eroding exporters’ profits just as faltering global growth undermines demand, with Panasonic Corp yesterday forecasting a record loss for the 12 months ending March.
Shinohara, formerly Japan’s vice finance minister for international affairs, said that Japan, the country with the world’s largest debt burden, should keep working on improving its finances even with Europe in crisis.
“One of the most immediate global policy challenges is to address medium-term fiscal imbalances while supporting growth,” he said. “This is especially true for Japan, where fiscal consolidation will remain a priority.”
At a press briefing, the IMF official said that credit concerns in Europe could be a “good lesson for Japan.”
Standard & Poor’s has had Japan’s debt rating on a negative outlook since April after lowering it to “AA-” in January last year.
The nation’s debt may exceed ￥1 quadrillion for the first time next fiscal year as the nation rebuilds from last year’s earthquake and tsunami. Japan’s lower house of parliament yesterday approved a fourth post-disaster stimulus budget costing ￥2.5 trillion. The last three plans totaled ￥18 trillion.
Talking about other Asian economies, Shinohara said that those with low debt levels, such as China, have more room to implement policies that support growth.
Japanese Finance Minister Jun Azumi on Thursday escalated his warnings against a strengthening yen, and signaled that the US Federal Reserve is partly to blame.
“Speculative moves are increasing in the market and we can’t overlook them,” Azumi told reporters.
Against the “backdrop” of the Fed’s plan to keep interest rates exceptionally low until 2014, “short-term speculative buying” has increased, contributing to the yen’s gain, he said.