Expectations that the Bank of Japan will cut interest rates doubled yesterday after the government urged the central bank to do more to support the ailing economy.
Investors saw a 40 percent chance that the policy board will reduce the overnight call rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading, up from 20 percent earlier in the day.
The Tankan result, job cuts and market turmoil will probably prompt the central bank to cut borrowing costs this week, according to Takehiro Sato, chief Japan economist at Morgan Stanley in Tokyo.
“Monetary easing policies will likely be ushered in with a rate cut,” Sato wrote in a report on Dec. 15. He said the central bank will also consider buying stocks and corporate debt as well as increasing the amount of government bonds it purchases each month from 1.2 trillion yen ($13 billion).
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