The Bank of Japan left its key interest rate and stimulus programs unchanged, five days after lawmakers rejected the government’s nomination for its policy board.
The central bank kept its key rates between zero and 0.1 percent, according to its statement released in Tokyo Tuesday. It left its 30 trillion yen ($368 billion) asset-purchase fund and 35 trillion yen credit-lending program unchanged, in line with the forecasts of 12 of 13 economists surveyed by Bloomberg News.
The upper house of parliament blocked the appointment of BNP Paribas SA economist Ryutaro Kono to the central bank’s board last week after some lawmakers expressed concern he wouldn’t do enough to help the country overcome more than a decade of falling prices. Economists from Morgan Stanley to Mizuho Securities are predicting an expansion of easing at the BOJ meeting on April 27 when the price outlook is expected to show a gap between the 1 percent inflation target and actual price growth.
“The BOJ will probably add stimulus later this month,” Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo, said before the report. “The BOJ must be feeling growing pressure from investors and politicians after it pledged to elevate its commitment to end deflation.”
The yen traded at 81.60 per dollar as of 12:33 p.m. in Tokyo. It had earlier weakened against all of its 16 major counterparts on investor speculation that the central bank would consider more easing measures. The Nikkei 225 Stock Average, which marked its biggest weekly loss since August last week, rose 0.5 percent.
Japan’s central bank will expand its asset purchases by 5 trillion yen at the next meeting, Yasunari Ueno, chief market economist Mizuho Securities Co. in Tokyo, said before Tuesday’s decision. Izuru Kato, chief market economist at Totan Research Co., expects up to a 10 trillion yen increase.
The BOJ’s Tankan survey this month showed large manufacturers’ confidence failed to improve in March and executives see the yen averaging 78.14 per dollar this fiscal year. Akio Toyoda, the president of Toyota Motor Corp., said last month an “appropriate level” is 95 to 100. (Bloomberg)
Sony Corp., will cut 10,000 jobs worldwide, the Nikkei newspaper reported Monday, without identifying where it obtained the information. The consumer electronics company more than doubled its annual loss forecast which was affected by the strong yen that reduces profits when repatriated.
Escalating Pressure
Lawmakers last week escalated pressure for extra action by blocking the nomination of Kono and renewing calls for a more “proactive” monetary policy. Two of nine BOJ board seats have been vacant since April 5.
Prime Minister Yoshihiko Noda met Governor Shirakawa on April 6. Noda is currently struggling to convince his party members and opposition parties to double the 5 percent sales tax to contain world’s largest public debt.
Consumer prices rose 0.1 percent in February before the BOJ will review its inflation outlook of 0.5 percent for the year starting in April 2013 on April 27.
“The BOJ is unlikely to remain in a wait-and-see stance for long,” analysts including Masayuki Kichikawa at Bank of America Merrill Lynch in Tokyo, wrote in a report Monday. “In addition to the delay in the recovery of business sentiment, pressure on the BOJ is increasing both from politicians and the financial markets.”
