Japanese Economy Minister Seiji Maehara said the country needs more monetary easing and policy efforts to encourage growth as the government prepares for election against an opposition that has stronger public support.

The government plans to inject about 200 billion yen ($2.5 billion) into the economy, Maehara said Sunday on a Fuji Television program, without giving details on the source of those funds. Spending this fiscal year includes 910 billion yen of stimulus programs requiring parliament’s approval, 400 billion yen for earthquake recovery and a further 347.8 billion yen, he said.

“There are fiscal-easing moves worldwide, but on a monetary basis Japan is falling short,” Maehara said. While “easing is not a panacea,” without that and policy moves “Japan’s sovereign credit rating may face a downgrade.”

The government on Oct. 12 issued a downgraded assessment of Japan’s economy for a third month, the longest streak since the 2009 global recession, as gains in the yen and slowing overseas demand hurt exporters. Prime Minister Yoshihiko Noda, who last week ordered his Cabinet to draw up economic stimulus measures by November, failed to reach agreement with the two largest opposition parties on passing legislation needed to fund spending amid a standoff over the timing of a general election.

Noda’s stimulus plans boost the odds that the Bank of Japan will increase asset purchases when it meets on Oct. 30 to present its semi-annual Outlook, said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official.

“Continued pressure on the BOJ to ease further” is a “certainty,” Adachi said in a report. The central bank will probably add 10 trillion yen of government debt to its asset purchases, and may also include an increase in equities, he said. 

(Bloomberg)