The Bank of Japan will consider easing monetary policy further, possibly at an emergency meeting before next month’s rate review, if further rises in the yen push down Tokyo stock prices enough to hit business sentiment, sources said. The government may also intervene unilaterally again in the currency market to weaken the yen, although analysts doubt whether such moves can alter a broad weak dollar trend.
A senior government official expressed Tokyo’s readiness to step into the currency market to stem yen rises if necessary, saying that recent moves have been speculative. “Japan’s stance is consistent in that it will take decisive action depending on market developments,” the official told Reuters on Sunday. The central bank loosened policy just two weeks ago to ease the pain of persistent yen strength on the export-reliant economy, and has expressed its readiness to act again if the prospects of a moderate economic recovery come under threat.
After the yen rose to a fresh record high against the dollar last Friday, BOJ officials will scrutinize Asian market moves on Monday and start debating whether the potential harm from recent yen gains warrants further policy action. The BOJ’s next regular rate review is on September 6-7. But the chance of it easing its already super-loose policy before that cannot be ruled out, depending on market developments, sources familiar with the BOJ’s thinking say. “We will act swiftly, if needed, with an eye on economic conditions,” one of the sources said. Still, a brief yen spike to fresh records alone would not trigger immediate BOJ action.