Bank of Japan May Take Further Steps

A top executive at the Bank of Japan said Sunday that the central bank would consider further steps to ease monetary policy if the country’s economy continues to founder.

The remarks by executive director Minoru Masubuchi came days after the central bank decided to pump more cash into the country’s banking system in a move that surprised investors and gave a momentary lift to the nation’s slumping stock market.

The Bank of Japan is under intense pressure from the government to do more to fight deflation and encourage lending, even though interest rates in Japan are already near zero. Some conservative lawmakers blame an abortive attempt last summer by the bank to guide up interest rates for causing the country’s sputtering economy to stall.

But Masubuchi hinted Sunday that the much-maligned financial institution has not yet fired all of its policy bullets.

“If a further loosening of monetary policy should become necessary, then a flexible approach would be needed to determine what measures can be taken,” he said on a talk show on national broadcaster NHK television.

Japan’s benchmark stock index jumped almost 4% on Tuesday after the BOJ said it was increasing its purchase of long-term government bonds, but the market retreated at the end of the week, finishing at a near 17-year low on Friday.

Separately, Japan’s top economic planner on Sunday prodded the BOJ to more aggressively support consumer prices, a measure the government says is key to lifting the country out of its 11-year slump.

Economic Minister Heizo Takenaka, also appearing on the NHK program, insisted the BOJ should take more creative steps toward reversing a drop in consumer prices and called for greater transparency in the central bank’s policy toward deflation.

“There is room for more innovative thought,” he said.

The government considers falling prices one of the biggest obstacles to economic recovery, as they translate into smaller profits for companies and skimpier paychecks for workers.

Analysts worry that chronic deflation could plunge the economy into a steeper decline. But many say that with interest rates at zero, the BOJ has done all it can for the economy and that the responsibility now rests with the government.