Seventy-five percent of economists and financial analysts surveyed by Kyodo News believe the Bank of Japan will take additional credit-easing measures within three months, amid an increasingly gloomy economic outlook.

A poll of 28 experts saw 21 say the BOJ will ease its monetary grip further within three months, while another two said the central bank will do so within six months.

"The odds are that financial-system instability and deflationary pressures will grow as the pace of outright disposals of banks' bad loans accelerates," said Tomohiro Noda, senior economist at Industrial Bank of Japan. "The BOJ just cannot ignore calls from abroad for further monetary easing."

Last month, the BOJ adopted additional credit-easing measures to help stabilize Japan's financial system and to try and ensure that an economic recovery takes place as soon as possible.

These measures include injecting the banking system with more liquidity by raising the outstanding balance in current accounts held at the BOJ by commercial financial institutions to between 10 trillion yen and 15 trillion yen from the current level of "more than" 6 trillion yen.

The central bank also decided to expand its outright purchases of long-term government bonds to 800 billion yen per month from 600 billion yen and to actively buy commercial paper issued by companies under "gensaki" reverse repurchase agreements.

Most of the economists and analysts surveyed believe the BOJ will increase its monthly government bond purchases to around 1 trillion yen from the current 800 billion yen.

Many of them also expect the BOJ to buy more bonds and CP issued by firms and to raise the target for the outstanding balance in current accounts at the BOJ.

Five of the 28 experts said the BOJ will probably leave the current monetary policy unchanged for the next year as it has little leeway left.

Nishi-Nippon Bank plea

Nishi-Nippon Bank, a Fukuoka-based regional bank, has asked Daiwa Bank and local businesses to help it boost its capital base.

Among the options under consideration is the issuance of new shares and preferred securities to Daiwa Bank and local firms, sources said.

Nishi-Nippon Bank is a major creditor bank of Kotobukiya Co., the biggest supermarket chain in Kyushu. The latter went under last month with debts of 295.9 billion yen.

Nishi-Nippon Bank fell into the red during the first half of fiscal 2001, suffering some 78 billion yen in loan-loss charges over its loans to Kotobukiya and its group firms.

The Financial Services Agency is currently inspecting the bank's financial health, the result of which could determine the scale of a capital increase.