The Bank of Japan looks like it's moving towards delivering additional stimulus

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The Bank of Japan (BOJ) appears be moving towards delivering additional monetary policy stimulus later this week, according to reports circulating on Wednesday morning.

Reuters, citing an article in the Nikkei newspaper, states that “support is growing within the Bank of Japan for additional monetary easing on Friday with several options being floated as possibilities”.

Citing unnamed sources, the report notes that “BOJ bureaucrats have internally laid out several options including deepening negative interest rates, expanding government bond purchases and topping up buying of exchange-traded funds (ETF)”.

“The BOJ governor and deputy governors will consider these options, though there has been little progress on narrowing down the options,” the Nikkei said.

The prospect of so-called “helicopter money”, speculated upon earlier this month by some in financial markets, was not mentioned as a potential policy option.

While the Nikkei report suggests that the board, as a whole, is moving closer to delivering additional stimulus, it also stipulated that “some in the nine-member board feel the central bank has done enough for now and thus are expected to dissent”.

The Bank of Japan’s July policy decision is expected to arrive around 1pm AEST on Friday.

Given heightened expectations that the bank will deliver further easing, along with the likelihood of thin market liquidity surrounding the event, the decision will almost certainly deliver extreme market volatility, particularly in the Japanese yen and Nikkei 225.

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