TOKYO -- Support is growing within the Bank of Japan for further monetary easing ahead of the two-day policy board meeting set to begin Thursday.
Such new easing would complement an upcoming government spending package, bolstering efforts to shore up Japan's economy and prices amid mounting global uncertainty stirred by issues including the U.K.'s vote to leave the European Union.
Top officials are looking at multiple proposals. The main options are to cut interest rates beyond the current level of minus 0.1%, buy more Japanese government bonds on top of the current 80 trillion yen annually or expand purchases of other assets, such as exchange-traded funds.
The central bank has had little luck narrowing its choices before the policy board meeting. Banks firmly oppose bringing rates further into negative territory, which would force them to pay more interest on their deposits with the central bank, squeezing profits tighter. Some in government advise avoiding this option as well. But increased ETF purchases are seen as insufficient on their own.
"We have high hopes that [the BOJ] will continue making its best effort," Finance Minister Taro Aso told reporters Tuesday. Some in the central bank are starting to argue that demonstrating the bank's cooperation with the government would do more to help the economy and inflation.
But other policy board members likely will object to any such proposals. These members say the mechanisms behind price growth are still working properly and that the BOJ is cooperating enough with Tokyo as is. With markets already pricing in more easing, the yen could spike against the dollar and stock prices fall if the bank decides not to act.