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The
Bank of Japan can hold off on action next week but should expand
stimulus as early as its meeting on Oct. 30 to counter weakness
in the economy, said Yamamoto Kozo, a ruling party lawmaker and
close economic aide to Abe.
"I can see how the BOJ would prefer to stand pat (next week)
because there's not enough data to scrutinize," Yamamoto told
Reuters on Friday.
"But the economy is not doing well ... It would be strange not
to ease if the BOJ were to cut its growth forecasts."
The BOJ is likely to offer a bleaker view on overseas economies
and exports at next week's rate review, as China's slowdown hits
Asian markets and demand for Japanese shipments.
It is also set to cut its long-term growth forecasts at the Oct.
30 meeting, though many central bankers are wary of deploying
further stimulus.
They are concerned about diminishing policy tools and the rising
costs of heavy money printing - such as drying up liquidity in
the bond market.
Some lawmakers have also complained that further monetary easing
is unwelcome as it could further sap the yen and boost imported
food prices, hitting households and small retailers.
But Yamamoto said such pain from a weak yen should not be an
excuse to hold off on monetary easing. The government can ease
the pain by offering fiscal spending of up to 5 trillion
yen($41.47 billion) to help low-income households, he added.
With the dollar/yen still below levels hit before the collapse
of Lehman Brothers in 2008, some more gains in the pair would
still benefit Japan's economy, Yamamoto said.
"A bit more (appreciation) is okay because before the collapse
of Lehman Brothers, the dollar was around 124 to 125 yen," he
said, when asked if further yen falls were beneficial for
Japan's economy.
The dollar stood around 120.50 yen on Friday.
(Reporting by Leika Kihara; Editing by Chris Gallagher and
Clarence Fernandez)
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