Hayami says he will consider additional monetary easing

Bank of Japan Gov. Masaru Hayami told top economic ministers that the central bank will consider implementing additional monetary easing steps, Chief Cabinet Secretary Yasuo Fukuda told reporters late Wednesday.

“(The BOJ) knows what should be done, and will do whatever is necessary,” Fukuda quoted Hayami as saying.

The BOJ will hold its next policy meeting Wednesday.

Hayami made the comment following pressure from Prime Minister Junichiro Koizumi for further easing of BOJ’s credit grip.

Koizumi said at a plenary session of the House of Councilors on Wednesday that he expected the BOJ to implement monetary policy that can be “effective in terms of both quality and quantity.”

The remarks followed similar pressure by John Taylor, U.S. treasury undersecretary for international affairs, during a speech in Tokyo on Tuesday.

On Oct. 16, Hayami reiterated at a regular news conference that he saw no immediate need to further loosen the central bank’s credit grip, but that the BOJ would relax its monetary policy if necessary.

Financial analysts said the BOJ is likely to examine the possibility of increasing outright purchases of long-term government bonds from the current level of 1 trillion yen a month at the upcoming meeting.

It may also consider raising the target of keeping the outstanding balance of current account deposits by private financial institutions held at the BOJ from the present level of between 10 trillion yen and 15 trillion yen, they said.