BOJ likely to further ease monetary grip at upcoming policy meeting+

TOKYO, Oct. 2 Kyodo -
The Bank of Japan is likely to decide on an additional monetary easing step at
its policy meeting next week as downward risks to the Japanese economy are
growing amid the yen's appreciation, sources familiar with the matter said
Saturday.
The central bank is apparently considering expanding its low-interest-rate
funding program further to guide market rates lower, they said. The BOJ will
hold a two-day policy meeting from Monday and its results will be announced
Tuesday.
In concert with the government which is drafting a supplementary budget to fund
an additional stimulus package, the BOJ aims to arrest the yen's rise and
prevent the economy from stepping back into a recession by easing its monetary
grip further, the sources said.
The BOJ is scheduled to hold a meeting as early as Oct. 28 to compile its
biannual Outlook for Economic Activity and Prices report and may seek to
further expand its monetary easing steps if necessary, they said.
The central bank last eased its monetary grip at an extraordinary policy
meeting Aug. 30.
The BOJ introduced a new funding program last December to offer a total of 10
trillion yen in three-month loans to financial institutions at an annual
interest rate of 0.1 percent.
The central bank expanded the program to 20 trillion yen in March and launched
a new 10 trillion yen, six-month operation Aug. 30, bringing the total amount
available under the new funding program to 30 trillion yen.
At the upcoming policy meeting, the BOJ is expected to discuss whether to
increase the three- or six-month lending program by 10 trillion yen, the
sources said, adding it may discuss whether to launch a one-year funding
operation.
An option of boosting purchases of treasury bills to provide ample funds to the
market is also emerging, they added.
The government and BOJ stepped into the market Sept. 15 for the first time in
six-and-a-half years, selling yen for dollars to stem the Japanese currency's
rapid rise.
Shortly after the intervention, the dollar rose back above the 85 yen line from
the upper 82 yen level. In recent trading, however, the dollar traded in the 83
yen level.
The BOJ's quarterly Tankan business sentiment survey report released Wednesday
showed companies are cautious about their prospects amid the yen's rise and the
waning effects of a government subsidy program for purchases of environmentally
friendly cars.
==Kyodo
2010-10-03 01:10:01


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