Japan PM adviser sees no need for BOJ easing, looks toward tapering

[TOKYO] A key economic adviser to Japan's prime minister said on Tuesday that he saw no need for the Bank of Japan to deploy additional stimulus to meet its 2 per cent inflation goal next year, warning that it could cause the yen to weake and prices to overshoot.

Etsuro Honda, special adviser to the Cabinet and a leading architect of Prime Minister Shinzo Abe's reflationary economic policy, suggested that the next step for the central bank would be to taper its massive asset purchases.

For that to happen, Mr Honda told Reuters in an interview, the BOJ would need to assess the impact of a planned sales tax hike to 10 per cent in April 2017.

Mr Honda's view stood in contrast with his comments earlier this year when he said the BOJ could need to think about taking action if inflation rose too slowly.

The world's third largest economy and its price trend are on track for steady growth, he said.

Slumping exports and tepid private consumption have raised the prospect that the economy may have contracted in the April-June quarter, casting doubt on the central bank's view that growth will rebound and inflation will accelerate towards its ambitious 2 per cent goal.

The BOJ is in no mood to expand its already massive monetary stimulus, but some analysts say it may be forced to act later this year if private consumption fails to pick up, prolonging the soft patch and keeping companies from raising prices.

REUTERS