After the European Central Bank and the Federal Reserve, it is now the turn of the Bank of Japan to prop up the faltering domestic economic recovery as tepid global growth and the European squabble over fixing the debt crisis make the country's export prospects more bleak.
The Policy Board of the Japanese central bank is expected to announce its policy stance at the end of a two-day meeting on Wednesday. Speculation is rife that the board will announce a fresh round of stimulus measures to revive the economy as the Eurozone debt crisis showed no signs of abating.
A meeting of European finance ministers last weekend revealed the widening rift among the policymakers mainly on the ECB's role in banking supervision and on the timing for the Single Supervisory Mechanism to enter into force.
Policy moves by the ECB and the Fed have also mounted pressure on the BoJ to act, mainly to stem gains in the local currency. Expectations of possible yen interventions by the central bank on the behalf of the Ministry of Finance are also doing the rounds.
Japan's Finance Minister Jun Azumi on Friday repeated his warning that the government may undertake decisive action to contain excessive gains in yen, after the currency hit a seven-month high following Fed's stimulus announcement on September 13.
A government report this month suggested that the modest recovery experienced by Japan's economy in the past months has halted. Cutting its economic assessment for a second consecutive month, the Cabinet Office said in its monthly report that the recovery is "pausing" due to a slowdown in global economic activity.
Further slowing down of overseas economies and sharp fluctuations in the financial and capital markets under a high degree of uncertainty about the prospects of the Eurozone debt crisis are the downside risks for the Japanese economy, the government said.
BoJ's most recent policy move was in April, when the Board decided to increase the total size of the asset purchase program by about JPY 5 trillion.
The ECB announced its decision to embark on "outright monetary transactions" or OMTs, which will allow the bank to purchase sovereign bonds in the secondary markets, during its latest Governing Council meeting on September 6.
The Federal Reserve on Thursday said it will buy $40 billion of agency mortgage-backed securities every month in its third round of quantitative easing.
by RTT Staff Writer
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