Japan's central bank decided yesterday to raise the amount of extra cash in the financial system by ? trillion (US$28 billion), seeking to ensure that the country's fledgling recovery continues.
In a surprise move, the Bank of Japan's policy board boosted the target of liquidity to a range of ?0 trillion to ?5 trillion.
The target is the amount that commercial banks keep at the central bank. The greater that amount of money, more cash flows through the system.
The easing of monetary policy is the first since Oct. 10 last year when the central bank lifted the upper end of the account balance target range by ? trillion to ?2 trillion.
Expectations had been high the bank would take no action at the two-day meeting that began Monday.
Signs have been emerging lately the economy is slowly getting back on track, largely on the back of healthy exports to the US, China and other Asian nations.
But the Bank of Japan, or BOJ, said it wanted to ensure the upturn does not fizzle out and it also said it was worried about recent currency fluctuations that could hurt the Japanese economy.
Despite the rebound, growth is threatened by the rising value of the yen against the dollar, which slashes the value of overseas earnings of Japanese exporters.
The US dollar has fallen to as low as ?05 levels lately although it was trading in Tokyo at ?07 levels yesterday.
"The BOJ determined today that it is appropriate to increase the account balance target to ensure an economic recovery and to show our stance of beating deflation," the bank said in a statement yesterday.
"Japan's economy is recovering gradually and is anticipated to continue recovering," it said, adding that growth was expected to be moderate.
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