By Leika Kihara;
August 27, 2010 7:50 PM EDT
The Bank of Japan is examining holding an emergency meeting early next week to ease monetary policy as the strong yen threatens the country's fragile economic recovery, a source familiar with the matter said.
The most likely option is for the central bank to expand its fund-supply tool put in place in December last year, under which it offers up to 20 trillion yen ($234 billion) in three-month loans to banks at 0.1 percent, the source told Reuters.
Another possibility is for the BOJ to increase its outright government bond purchases from the current 21.6 trillion yen per year, although this is less likely due to strong opposition from some within the BOJ.
The date of the emergency meeting is yet to be decided and there is still a chance the BOJ may opt to wait until its regular policy-setting meeting on Sept. 6-7 to loosen policy, said the source, who declined to be named due to the sensitivity of the matter.
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But an emergency meeting may be held as early as Tuesday, when BOJ Governor Masaaki Shirakawa is back in Tokyo after his visit to the United States for a central bankers' meeting in Jackson Hole, Wyoming.
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