The Bank of Japan (8301)’s decision to hold off on fresh monetary stimulus for a year puts pressure on the Abe administration to revive growth through fiscal measures and risks capping losses in the yen that aid export competitiveness.
Governor Masaaki Shirakawa, whose term ends in less than 11 weeks, yesterday agreed to set the 2 percent inflation target urged by Prime Minister Shinzo Abe, while stopping short of immediate action to achieve it. The BOJ plans to start open- ended asset purchases in January next year.
Abe, elected last month on a platform calling for an end to two decades of deflation, hailed the BOJ commitment to consumer- price increases that would raise prospects for higher corporate revenues and tax receipts. His optimism in face of yesterday’s slump in stocks may reflect recognition that stronger measures must wait for a new BOJ chief.
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