TOKYO—The Bank of Japan will likely take bold action next month, an adviser to Prime Minister Shinzo Abe said, rejecting speculation that the central bank may use a coming policy review to justify a paring back of its stimulus.
“However they conduct the assessment, there is already an answer: Monetary policy hasn’t been eased enough,” Etsuro Honda said of the review set for release at the central bank’s next policy meeting in September. Without further action, people would give up on the Abenomics drive to defeat deflation, he added.
The central bank’s planned “comprehensive assessment” of its policies has generated uncertainties and speculation over the direction of Mr. Abe’s 3 ½-year effort to end deflation. The review was announced at the bank’s previous board meeting in late July, where the BOJ took modest easing action.
Speaking in a recent interview, Mr. Honda questioned the need for the assessment. He said that while a sales-tax increase and overseas factors had canceled out the positive impact of monetary easing, “the only policy implication” the review would generate was the need to ease policy further.
Monetary policy makes up the core of the prime minister’s Abenomics growth platform alongside flexible fiscal policy.
Uncertainties over the implications of the review have made financial markets more volatile, pushing the yen beyond the ¥100 mark against the dollar in a further hit to Japan’s exports.