"We won't be in trouble without those programs. But we want to tap them if they will be extended"
- An official at a major Japanese bank
This week only few of the Bank of Japan watchers are expecting the central bank to tweak its monetary policy ahead of the looming April's tax hike that is likely to become a massive drag on the economy. Nevertheless, they are expected to consider an option of expansion a pair of its lending programmes, supporting other efforts to achieve a stable 2% inflation level. One of the measures to boost inflation is to force commercial banks to reduce the amount of cash they have parked in safe government bonds and increased exposure to riskier assets like loans. Currently, the BoJ offers loans at the annualized rate of just 0.1%.
Amid approaching end-March deadline when the programmes will be completed, the nine board members will have to decide either to continue or to abandon them during the February 17-18 meeting. While programmes still have to produce the intended results, most of the members are expected to support Kuroda's initiative to expand programmes. Commercial lending to firms and households has increased by 2.5% in January from the same months a year earlier, suggesting the measure is working. Moreover, the expansion of these programmes will help to fend off criticism surrounding the BoJ that has only flooded financial markets with cash in order to weaken the Yen and failing to channel these funds into the real economy.
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