The Bank of Japan is examining a further easing of its ultra-loose monetary policy and may decide on such a move this month, the Nikkei newspaper reported, weakening the yen and lifting government bond futures to a two-month high. The government, its fiscal options limited by a ballooning fiscal debt, has been pressuring the BOJ to do more to beat deflation even as most other major central banks mull rolling back stimulus steps put in place during the global crisis. Finance Minister Naoto Kan said he would welcome any BOJ measures to help beat deflation but had not heard directly from the central bank about what it was considering. Another policy easing could raise questions about the BOJ's independence after it buckled under government pressure in December and expanded its supply of funds to financial markets. “Probably without government pressure, maybe the BOJ would stand pat,” said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Securities Japan. “The government wants the BOJ to do something more toward the end of the fiscal year (on March 31). In addition, there are uncertainties in financial markets, especially FX, because of the Greek fiscal problems etc,” she said. The BOJ's likely aim would be to prevent further yen gains and stock declines from hurting corporate sentiment, she said. The dollar rose 0.3 percent against the yen to around 89.30 yen after the report, March JGB futures rose to 140.27, the highest since December, and the yield curve steepened. The BOJ board, which next meets on March 16-17, will debate whether to expand the fund-supply operation it put in place in December, in which it extends loans to commercial banks at the policy rate of 0.1 percent, the paper said. It will either boost the amount of funds it supplies in the operation from the current 10 trillion yen ($112.1 billion) or extend the duration of the loans to six months from the present three months, the Nikkei said without citing sources. After this month's rate review the BOJ board will then meet twice in April. An expansion of the central bank's fund-supply operation has been cited by markets as the most likely option. “I haven't heard directly from the BOJ about what it plans to do,” Kan, who is also deputy prime minister, told reporters after a cabinet meeting. “The BOJ governor and deputy governor have appeared regularly in parliamentary committees, where I've repeatedly said the government will do more to end deflation and that I hope the BOJ also does more. The BOJ could be responding to that.” But the Nikkei said some board members were cautious about loosening policy further with the economy now in relatively good shape, so a decision may be delayed until April, it said. Noda: No need to ease more BOJ board member Tadao Noda said only on Thursday he saw no need for further easing now, and he also ruled out increasing the amount of government bonds the bank purchases. The reported move would likely be aimed at pushing down longer-term money market rates, such as six-month to one-year borrowing costs, to encourage spending by households and companies. Lower yen borrowing costs would also help prevent sharp rises in the yen from hurting exports, a driving force behind Japan's fragile recovery, the Nikkei said.
