A draught document obtained by Reuters on Monday showed that Japan’s government will ask the central bank to keep an eye on how sharp market moves affect the economy. This is part of a planned spending package that is meant to soften the blow of rising living costs.
In the draught of the document that explains the details of the package, the government said that “global recession fears were growing” and that this could hurt both spending and investment.
The government and the Bank of Japan need to use the right mix of fiscal and monetary policy to avoid economic risks, the document said, hinting at the possibility of a big spending plan.
The draught document said, “We hope the Bank of Japan uses appropriate monetary policy to reach its price target in a sustainable and stable way, keeping a close eye on the effects of financial market volatility.”
Related: Asian equities are down on rate hike fears, while the Japanese currency is at 32-year lows.
In June, the government released an outline of its long-term economic policy. All it said was that it hoped the BOJ would reach its price target in a stable and sustainable way, “keeping an eye on economic, price, and market developments.”
The package is likely to be approved by Prime Minister Fumio Kishida’s government at a cabinet meeting on Oct. 28, the same day the BOJ ends a two-day rate review.
Most people think that the BOJ will keep its extremely loose monetary policy at the policy meeting.
