Japan’s central bank became the biggest creditor to the government for the first time on record, reflecting a shift driven by unprecedented easing to spur inflation in the world’s third-biggest economy.
Bank of Japan board member Hidetoshi Kamezaki highlighted economic risks of a rising yen and said the bank will act proactively to combat deflation, a more aggressive stance than his colleagues have indicated.
Japan’s economy shrank last quarter as exports tumbled and consumer spending slumped, putting pressure on the central bank to add stimulus and hurting Prime Minister Yoshihiko Noda’s record as he prepares for elections.
The Bank of Japan’s decision to hold off on fresh monetary stimulus for a year puts pressure on the Abe administration to revive growth through fiscal measures and risks capping losses in the yen that aid export competitiveness.
The Abenomics euphoria that’s boosted the Japanese stock market 31 percent this year has yet to convince chief executives to invest more in factories and equipment in the world’s third-largest economy.