The Bank of Japan is ready to ease its policy further if needed, Deputy Gov. Kiyohiko Nishimura said, at the same time emphasizing that monetary conditions are already loose and urging the government to boost growth to end deflation.
"The BOJ has been and will always be ready to take appropriate and decisive action," Nishimura said Wednesday. The asset purchase program introduced in 2010 has "already achieved its intended effects" as financial conditions are extremely accommodative, he added.
Shinzo Abe, the head of the Liberal Democratic Party, which is considered the front-runner in the Dec. 16 Lower House election, has been calling for unlimited easing until the country achieves an inflation goal of 2 percent. Nishimura said the BOJ will continue with powerful monetary easing until its goal of 1 percent inflation is in sight, noting prices were unchanged in October from a year earlier.
"Nishimura's comments signal that the BOJ is mindful it has to take action soon because of a weak economy and rising political pressure," said Masamichi Adachi, a senior economist at JPMorgan Securities. "His comments show the BOJ thinks it's fulfilling its duty and it is time for the government to do their job to boost the economy."
The challenge for the central bank and government now is to encourage companies to make use of the extremely accommodative financial conditions, Nishimura said.
The BOJ's unlimited loan support program will "stimulate proactive credit demand by firms and households" by providing funds to financial firms to facilitate lending, Nishimura said. In addition, he said, "the bank strongly expects the government to generate new demand by vigorously promoting measures, including decisive regulatory reform, for strengthening Japan's growth potential."