Wed, May 21, 2003 - Page 10 News List

BOJ pumps more cash into economy

BLOOMBERG , TOKYO

Japan's central bank yesterday said it would inject more cash into the economy, saying declines in the nation's stock market and a weak dollar are clouding the outlook for the world's No. 2 economy.

It raised reserves it makes available to lenders to as much as ?30 trillion from a maximum of Japanese Yen 27 trillion, the bank said in a statement. The bank kept monthly purchases of government bonds, its main policy tool since cutting rates to zero in March 2001, unchanged at Japanese Yen 1.2 trillion (US$10.3 billion).

"Economic activity in Japan remains flat, but uncertainties about future prospects have recently been increasing," Bank of Japan Governor Toshihiko Fukui said at a news conference.

"Unstable stock and foreign exchange markets overshadow future prospects," he said.

The central bank is trying to reassure investors concerned that the government's decision to bail out Resona Holdings Inc, the nation's fifth-largest bank, would prompt requests for aid from other lenders, economists said.

"It's more of an announcement that they are reacting to Resona" rather than a shift in monetary policy, said Soichi Okuda, senior economist at Aozora Bank Ltd.

Since his inauguration on March 20, Fukui has announced policy steps at every policy board meeting. Two board members dissented from today's decision, he said.

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