The Bank of Japan (BOJ) is considering additional credit easing measures, including a possible interest rate cut, in an attempt to prop up the country's flagging economy amid the fallout from the global financial turmoil, sources close to the matter said today.
The central bank has specifically studied two options - a 0.25 percentage point cut in its main lending rate from the current 0.50 per cent and an additional liquidity provision into money markets while holding the rate steady, said the sources.
The BOJ is to decide on what action to take in a monetary policy meeting on Friday.
The bank's credit easing measures may come in harmonization with similar moves abroad.
The sources said the central bank apparently sees that if it leaves its monetary grip unchanged, it would send the already high value of the yen further up versus the US dollar and other major currencies.
An excessive appreciation of the yen in foreign exchange is generally unfavorable for the export-led Japanese economy.
As the global credit crisis has deepened, market participants increasingly speculate that the US Federal Reserve and the European Central Bank will lower their benchmark interest rates, respectively, today and Nov. 6.
Separately, the Japanese government is to announce its additional economic stimulus package tomorrow.
The BOJ's interest rate cut would the first since March 2001, when the bank introduced the "quantitative easing" policy, under which the central bank flooded the financial system with ample liquidity in order to drive the interest rate for unsecured overnight call money to near zero.
