Japan’s government bond yield curve is pricing in the success of Haruhiko Kuroda in adopting more aggressive easing as the next Bank of Japan governor and his ultimate failure to hit a 2 percent inflation target.
The Bank of Japan could add further stimulus if warranted by economic and price conditions, Deputy Governor Hirohide Yamaguchi said, while rejecting criticism of the impact of the bank’s policies on the yen.
The Bank of Japan expanded its asset-purchase program for the third time in four months, and will reconsider its objectives for inflation as incoming Prime Minister Shinzo Abe urges more action to end price declines.
Japan’s fatal tunnel tragedy this week escalated a political debate over infrastructure spending as the nation heads for elections, bringing focus to aging transport networks in the world’s third-largest economy.
Election losses by the party of Japanese Prime Minister Naoto Kan over the weekend may delay a debate on whether to raise the sales tax to address the nation’s budget shortfall, according to Dai-Ichi Life Research Institute.
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.