June 24 (Bloomberg) -- Japan's central bank will probably refrain from adding more money into the economy after two months of rising stocks eased pressure on policymakers to step in, economists said. The Bank of Japan will probably leave its purchases of government bonds from lenders unchanged at 1.2 trillion yen ($10.2 billion) a month and keep the upper limit of the reserves it makes available to lenders at 30 trillion yen when policy makers meet Wednesday, according to all 15 economists in a Bloomberg News survey. The bank's decision is due tomorrow afternoon. ``The Bank of Japan pumped extra cash into the economy to support the faltering stock market, but that need is waning now,'' said Eiji Douke, chief fixed-income strategist at UFJ Tsubasa Securities Co. ``There won't be any change in policy this time.''
Bank of Japan Governor Toshihiko Fukui boosted the amount of shares the central bank buys from lenders by half in late March, shortly after taking office, to 3 trillion yen. Since that decision, which aimed to curb investment losses at banks saddled with 52.4 trillion yen in bad loans, the benchmark Nikkei 225 Stock Average rose by more than a 10th. In addition to boosting stock purchases, Fukui, who will mark his 100th day in office on Friday, earlier this month detailed a new plan to buy corporate debt from lenders and raised the level of reserves made available to lenders by almost half to 30 trillion yen in the past three months.
Economic Growth
``Fukui has taken one action after another and should be evaluated positively,'' said Kazuhiko Sano, chief strategist at Nikko Citigroup Ltd. in Tokyo. ``Still, his initiatives may just be a reaction to political pressure and have had a very limited impact on the economy.'' Japan's government last week lowered its monthly evaluation of the economy for the first time since January, saying companies are cutting investment and exports have ``flattened.'' The central bank, though it maintained the overall monthly evaluation of the economy unchanged, also said exports were slowing. The nation's economy expanded at the slowest pace in more than a year in the first quarter, growing 0.1 percent, seasonally adjusted, after gaining 0.4 percent in the fourth quarter.
Bonds
As stocks have surged in recent weeks, government bond prices have slumped, with bond yields having their biggest gain since September on Thursday. The yield on the No. 250 bond, which carries a 0.5 percent coupon and matures in 2013, jumped as high as 0.73 percent from a record 0.43 percent on June 11. The yield fell half a basis point to 0.625 percent at 11:08 a.m. in Tokyo. A basis point is 0.01 percentage point. ``Japan's bond market was shaken up last week, but there are no signs, so far, that bonds will again be volatile and threaten the health of Japanese financial institutions,'' said Izuru Kato, chief economist at Totan Research. ``There is no need for the central bank to buy more bonds or raise its reserve target.'' Buying government bonds and changing its reserve target have been the Bank of Japan's main policy tools since it cut rates near to zero in March 2001. Economists said the bank may again have to make adjustments in coming months, with the current stock market rally -- spurred by hopes of an economic rebound in the U.S., Japan's No. 1 export market --looking vulnerable.
Ten of the 15 economists surveyed said the central bank may raise reserve target above 30 trillion yen within three months. Four economists said the bank may increase its government bond purchases from 1.2 trillion yen per month. ``Japanese stocks may resume a decline if U.S. economy starts to show signs of losing momentum and then U.S. stocks start to slump,'' said Masaaki Kanno, a former Bank of Japan official who now heads the research division at J.P. Morgan Securities Asia Ltd. ``If so, the Bank of Japan would come under renewed pressure and would be forced to raise reserves above 30 trillion yen.'' Minutes of this week's meeting between Fukui and his eight policy-setting colleagues will be published August 13. //www.bloomberg.com