MNI INSIGHT: BOJ Board Member Tilting Towards More Easing

By Hiroshi Inoue

     TOKYO (MNI) - At least one member of the Bank of Japan's nine-strong board

is weighing a shift towards supporting more easing, MNI understands, although it

is unlikely the central bank will announce fresh stimulus at its two-day policy

meeting starting on Oct. 30 unless financial market volatility surges.

     BOJ staff are reexamining the prospects for economic activity and prices

for the BOJ's Quarterly Outlook, but Governor Haruhiko Kuroda has not told them

to consider additional policy options ahead of next week's meeting, according to

a person familiar with BOJ thinking. While downside risks to activity and prices

have increased, the impact on capital investment of the slowdown in overseas

economies has so far been limited, and BOJ economists still see no decisive

reason for abandoning their expectations of economic recovery.

     Were the governor to propose more easing, the two deputy governors would

almost certainly follow suit. Yutaka Harada and Goushi Kataoka, who have

dissented at past policy meetings, but have not proposed ramping up easy easing,

would also be likely to back him, depending on the content of his proposals.

     In addition, another board member who saw no need of additional easy policy

in July and September, does not rule out additional easing this time, due to a

deterioration in economic and price conditions. In addition, two members who

have been neutral on the prospect for policy changes, would also vote with the

governor, MNI understands.

     This would probably result in an 8-to-1 in favour of easing, if Kuroda were

to shift, as at least one member is seriously worried over the side-effects of

prolonged easy policy. This means that the danger of a close decision, which

Kuroda would want to avoid, is small.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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