The Bank of Japan yesterday announced further easing measures as it looks to help safeguard the country’s fragile economic recovery from the impact of a strong yen and a slowing global economy.
The bank said it would boost its asset buying fund by ¥5 trillion (US$66 billion) to ¥55 trillion, with the extra amount earmarked for the purchase of Japanese government bonds.
It also said its policy board voted unanimously to keep its key interest rate unchanged between zero and 0.1 percent.
Photo: AFP
The currency was barely changed at ¥76.00 to the US dollar after the announcement, compared with ¥76.03 beforehand.
“For the purpose of further enhancing the spread of monetary easing effects throughout financial markets, the bank judged it appropriate to designate the 5 trillion increase in the Asset Purchase Program for the purchase of Japanese government bonds,” the central bank said in a statement.
The bank’s asset purchase fund is a key policy tool it uses to buy Japanese government bonds, corporate bonds and exchange-traded funds.
However, one member of the nine-person board deemed the amount insufficient and voted against the move, instead favoring a ¥10 trillion increase.
By pouring liquidity into the market, the Bank of Japan hopes to improve flows to individuals and companies, to help encourage investment and improve the business climate. It also hopes that by relaxing credit conditions it will help weaken a strong yen that hit a new post-World War II high of ¥75.71 against the US dollar on Wednesday.
Japanese Finance Minister Jun Azumi earlier yesterday threatened government intervention in the financial markets, complaining that speculators are using Europe’s debt crisis as an excuse to push the currency higher.
“I have kept saying that we will take decisive steps against any excessive movement regarding market speculation, so I will closely monitor how the Tokyo market moves during the day,” Azumi said.
However, Azumi has conceded it would be tough to again rally support from Japan’s G7 counterparts for a concerted intervention to the weaken the yen, as happened when the unit surged in the aftermath of the earthquake and tsunami in March.
Concerns are growing in Japan that the strong currency, which erodes the repatriated profits of exporters and makes exports less competitive, could undermine a fragile recovery from the March 11 disasters.
Yesterday’s extra monetary easing follows the Bank of Japan’s move in August to expand the scheme to buy securities and boost liquidity to ¥50 trillion amid worries over the strong yen, in tandem with a government intervention in the market in a bid to weaken the currency. It added that despite the headwinds, it expected the economy to continue toward recovery.
“Although an adverse effect from a slowdown in overseas economies and the appreciation of the yen will continue for the time being, Japan’s economy is expected to return to a moderate recovery path,” the Bank of Japan said.
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