HAKODATE, Japan - Bank of Japan board member Takehiro Sato said he saw no need to expand monetary stimulus pre-emptively to counter the pain to the economy from next year's sales tax hike, seeking to dispel speculation of a near-term expansion of its ultra-easy policy.
Even if the BOJ had tools remaining to expand stimulus, doing so could be counter-productive after having deployed all possible steps in a single blow in April, said Sato, who is among those in the board who are more pessimistic about prospects for achieving the central bank's inflation target.
"The BOJ has broken away from the incremental approach (on monetary policy)," Sato told business leaders in Hakodate, northern Japan, on Wednesday.
"This is the time to carefully monitor the policy effects, taking into account future economic and price conditions."
Prime Minister Shinzo Abe is readying a $182 billion package this week in his latest bid to pull the economy out of deflation and bolster it ahead of the tax hike next April.
The BOJ stunned financial markets early this year by pledging to double base money via aggressive asset purchases to achieve 2 per cent inflation in roughly two years.
Expectations that the BOJ will maintain its ultra-loose policy longer than other major central banks, and may even expand it again next year, have bolstered Tokyo share prices and pushed the yen down to a six-month low against the dollar.
Sato said the BOJ ought to be ready to act again to remove any barriers that may emerge in meeting its price target. But he added that it would be hard to offer stimulus that can shock markets as much as, or even exceed, the April policy action.
"I think tools for additional action are limited. But that does not mean the BOJ is ruling out any options," he told a news conference after the meeting with business leaders.
While the BOJ sees no need for immediate action, its bureaucrats are pondering options in case pressure for further stimulus heightens next year, when the economy takes a hit from the sales tax hike and prices lose support from the weak yen that is now pushing up import costs.
Abe said on Wednesday that he believed BOJ Governor Haruhiko Kuroda would make the right decision, when asked about the possibility of additional monetary stimulus by an opposition lawmaker in parliament.
"I put great trust in (Kuroda), who has said he would not hesitate to take steps if risks emerged," Abe said.
Sato said the amount of government bonds the BOJ buys under the April framework is near the limit of what it can take up realistically, suggesting that he saw little room to top up purchases further even if it were to ease again.