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BOJ expands program to buy assets by US$126b
Source: Agencies |
September 20, 2012, Thursday
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Print Edition
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JAPAN'S central bank expanded its monetary easing by 10 trillion yen (US$126 billion) yesterday, moving to nurture the country's feeble economic recovery and cushion its exporters from the yen's rise.
The Bank of Japan wrapped up a two-day policy meeting by increasing its asset-purchasing fund to 55 trillion yen from 45 trillion yen. That followed the US Federal Reserve's decision last week to stimulate growth through so-called quantitative easing.
"There remains a high degree of uncertainty about the global economy. The pick-up in economic activity has come to a pause," the BOJ said in a statement. The central bank also predicted that activity will remain flat.
In what it said was the "pursuit of powerful monetary easing," the bank also eliminated a minimum required interest rate on Japanese government bonds it purchases, a move that will help to stabilize the yen, said Masayuki Kichikawa, an economist at Bank of America-Merrill Lynch.
He characterized the BOJ's move as a "pleasant surprise" since the central bank had not been expected to ease policy until late October.
Recent weak economic data and strong pressure from politicians anxious to not to see a further deterioration ahead of elections, expected soon, may have played a role.
The Fed, similarly alarmed by chronic weakness in the US economy, launched an aggressive new effort on September 13 to boost the stock market and make borrowing cheaper for years to come.
The Fed said it would buy mortgage bonds for as long as it deems necessary and keep interest rates at record lows until mid-2015 - six months longer than previously planned.
Japan has been wrestling for years with deflation, or falling prices, which can be a drag on economic growth. The rapid aging of the population has made the effort to break free from the prolonged bout of deflation doubly difficult.
The Bank of Japan wrapped up a two-day policy meeting by increasing its asset-purchasing fund to 55 trillion yen from 45 trillion yen. That followed the US Federal Reserve's decision last week to stimulate growth through so-called quantitative easing.
"There remains a high degree of uncertainty about the global economy. The pick-up in economic activity has come to a pause," the BOJ said in a statement. The central bank also predicted that activity will remain flat.
In what it said was the "pursuit of powerful monetary easing," the bank also eliminated a minimum required interest rate on Japanese government bonds it purchases, a move that will help to stabilize the yen, said Masayuki Kichikawa, an economist at Bank of America-Merrill Lynch.
He characterized the BOJ's move as a "pleasant surprise" since the central bank had not been expected to ease policy until late October.
Recent weak economic data and strong pressure from politicians anxious to not to see a further deterioration ahead of elections, expected soon, may have played a role.
The Fed, similarly alarmed by chronic weakness in the US economy, launched an aggressive new effort on September 13 to boost the stock market and make borrowing cheaper for years to come.
The Fed said it would buy mortgage bonds for as long as it deems necessary and keep interest rates at record lows until mid-2015 - six months longer than previously planned.
Japan has been wrestling for years with deflation, or falling prices, which can be a drag on economic growth. The rapid aging of the population has made the effort to break free from the prolonged bout of deflation doubly difficult.
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