ECONOMISTS in Japan are divided on whether the Bank of Japan (BOJ) will expand stimulus at its policy meeting this week, a Reuters poll found Friday, as the central bank battles external headwinds and waning inflation expectations with diminishing ammunition.

    Nine of the 10 economists polled by Reuters expected the BOJ to maintain the 0.1 percent interest it charges on some of the excess reserves that financial institutions park with the central bank, a rate newly set under January’s monetary easing decision.

    Of the 10, seven expected the central bank to keep intact its target for base money, or deposits and cash in circulation, at 80 trillion yen (US$731 billion).

    “Unless markets become volatile again next week, I don’t think the BOJ will expand asset purchases,” said Takeshi Minami, chief economist at Norinchukin Research Institute, on Friday.

    But one of the seven noted there was a possibility the BOJ could top up its purchases of risky assets.

    “It’s probably difficult to cut rates from here given the criticism the BOJ faced from the public ... But there’s a chance the BOJ could increase ETF or corporate bond purchases,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley.

    Three of the 10 economists polled expected the BOJ to increase its base money target, with UBS Securities projecting an expansion to 100 trillion yen accompanied by a cut in rates to minus 0.3 percent.

    “Additional monetary easing is necessary to beat deflation at an early date. The economic slump may be prolonged due to the yen’s rise and stock price falls since the start of this year,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute. Itochu expects the BOJ to top up its balance sheet target to 90 trillion yen.(SD-Agencies)