Japan’s government will mull fresh stimulus steps ahead of an expected meeting between Japanese Prime Minister Naoto Kan and Bank of Japan (BOJ) Governor Masaaki Shirakawa, as persistent gains in the yen threaten a faltering recovery.
However, any stimulus is expected to be relatively minor and is likely to involve re-allocating funds rather than new spending.
The Nikkei Shimbun said the government’s stimulus steps might include extending the year-end deadline on subsidies for household purchases of energy-efficient consumer electronics.
PHOTO: REUTERS
The government will start to debate stimulus steps to shore up the economy on Friday, Japanese Economics Minister Satoshi Arai was quoted as saying by Jiji news agency yesterday.
The discussion will likely precede a meeting between Kan and Shirakawa, which a government source said is expected on Monday next week.
However, the meeting may be brought forward to this week, depending on market developments, said the source, who declined to be identified due to the sensitivity of the matter.
Kan and Shirakawa, who government sources had earlier said may meet this week, are expected to discuss the yen’s strength and possible responses, although likely options are seen as limited.
“As the government looks poised to come up with additional economic stimulus, the BOJ is likely to back this up by saying that it will persistently keep an easy policy and support growth areas with its new loan scheme,” said Junko Nishioka, chief economist at RBS Securities.
“Even if the BOJ does not take new initiatives, the Kan-Shirakawa meeting will effectively be a form of verbal intervention to halt the yen’s rise, as with last week’s remarks from the finance minister and Shirakawa,” Nishioka said.
Policymakers have tried hard to talk down the yen after it surged to a 15-year high against the US dollar last week, adding to their headaches as they grapple with deflation and slowing growth in major export destinations such as the US and China.
Arai said the yen’s rise might not be stopped just by verbal intervention, Kyodo news agency reported, just as the yen remained within sight of its 15-year high against the dollar.
Kan has said the yen’s sudden rise against the dollar had become a concern and he would continue to watch it carefully, but has given few clues on whether and when he will meet Shirakawa.
The BOJ is worried about the impact the strong yen could have on business sentiment, but is likely to stand pat, unless the dollar falls at a pace of ¥2 to ¥3 in a single day and heads toward its all-time low below ¥8. The dollar is now hovering around ¥85.30.
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