The Bank of Japan may seek next week to counter a contraction of its balance sheet caused by the monthend expiration of an emergency-credit program and persistent deflation.
The BOJ's options include expanding a ¥10 trillion fund providing loans to banks, according to two central bank officials who spoke on condition of anonymity. The March 16-17 policy meeting comes days before the March 31 end of an unlimited collateralized loan facility.
By making some announcement about sustaining the BOJ's ¥19 trillion balance-sheet expansion, Gov. Masaaki Shirakawa may reassure investors and politicians anticipating additional liquidity. The central bank may want to save broader measures for April, when officials can discuss coming household and business confidence surveys and updated economic forecasts.