The Bank of Japan should consider buying foreign bonds and selling yen on the foreign exchange market to pull the economy out of deflation, a BOJ policy panel member said Thursday.
In a speech to local businesspeople here, BOJ Policy Board member Toshio Miki also said it would be worthwhile for the central bank to study the possibility of purchasing corporate bonds, commercial paper and asset-backed securities to control liquidity in the money market to an extent that does not distort the market mechanism.
"What is most important for the BOJ now is to prevent price falls," Miki said. "Given that the effects of quantitative monetary easing have yet to be felt, it is certain that sound monetary policy schemes are close to their limits. There is a limit to what monetary policy can attain alone, and monetary policy has to be taken in a package with other steps."
Miki said the government and the BOJ will likely need to mix monetary and fiscal policy.
Miki said increased loan-loss charges set aside by major banks in the fiscal first half to Sept. 30 were not sufficient and the government should not rule out the option of injecting more public money into the beleaguered banks.
"They should not hesitate to inject public money into major banks that are short of capital," Miki said.