The Bank of Japan can double its annual pace of bond accumulation to 100 trillion yen ($985 billion) to give fresh impetus to the economy after next month’s sales-tax increase, said an aide to Prime Minister Shinzo Abe.
Japan’s 10-year yields may decline to 0.5 percent by the first quarter of next year, even as the nation sells additional debt to pay for rebuilding after its strongest earthquake, according to Barclays Capital Japan Ltd.
Japan’s Democratic Party may hold a leadership vote by the end of the month after opposition parties agreed to back legislation to finance this year’s budget, a condition set by Prime Minister Naoto Kan for resigning.
The Bank of Japan is divided over whether to authorize a measure designed to quell bond-market volatility, with some officials concerned it would return the BOJ to a pattern of incremental steps that failed in the past, according to people familiar with the discussions.
The yen’s third monthly gain against the dollar means the Bank of Japan may decide next week to boost injections of funds into the financial system, as policy members seek ways to stem the currency’s strength and spur growth.
The Bank of Japan faces increased pressure to step up easing in coming weeks as political leadership changes and pessimism among manufacturers fuel calls for more aggressive action to end deflation and revive growth.
Japan’s government nominated two economists to the central bank’s board who previously signaled support for stimulus, underscoring forecasts for policy makers to expand asset purchases in coming months.