TOKYO -- The Bank of Japan has ample leeway to loosen monetary policy further, a member of Prime Minister Shinzo Abe's economic brain trust said Wednesday, arguing that the central bank should act to counter the yen's "speculative" appreciation.
"Additional easing such as deepening negative rates or expanding Japanese government bond purchases is a possibility, though I don't know if it'll come at the September meeting or in October or later," Koichi Hamada, a professor emeritus of economics at Yale University, told The Nikkei. The BOJ's policy board will meet Sept. 20-21 to assess the impact of its easing program and to discuss whether further steps are needed.
Some argue that the central bank's massive JGB-buying scheme has a shelf life of only another year or two. If the BOJ pays heed to this argument, then it "should buy foreign bonds for which there's a large amount outstanding," Hamada said. "That should also weaken the yen."
The central bank is legally barred from buying foreign debt for currency intervention purposes. "The relevant authorities should put their heads together and consider such measures as revising the law, or build international political consensus," Hamada argued.
Hamada also urged "appropriate" yen-selling by the Japanese government to curb a flood of buying by speculators, which he blamed for the currency's rapid appreciation since the BOJ announced its negative rate policy in January.