BOJ surprises with easing measures

HUGE REGIME CHANGE::The Japanese central bank promised an aggressive spending program, including buying riskier ETFs, to push down interest rates and boost lending


Fri, Apr 05, 2013 - Page 15

The Bank of Japan (BOJ) yesterday unveiled fresh easing measures to spur the stuttering economy after its first policy meeting under new management, moves hailed by some analysts as game-changing.

The yen plunged on the news, sparking a huge swing in the Nikkei 225 stock index, with investors cheering the measures as Japan wrestles with a mixed bag of economic data and no clear sign of a firm recovery.

A moderate magnitude 5 quake struck east of Tokyo just as the bank announced its new measures, which were described by one analyst as a “huge regime change” steered by Japanese Prime Minister Shinzo Abe.

Abe had tapped Haruhiko Kuroda, former head of the Asian Development Bank, for the bank’s top job, as he publicly criticized previous BOJ management for being too timid in stoking Japan’s economy.

After wrapping up its two-day meeting, the central bank said it would embark on an aggressive spending program, while pledging to meet a 2 percent inflation target within two years, aimed at reversing years of falling prices.

Its purchases would include riskier assets such as exchange-traded funds (ETFs) and real-estate investment trusts, as well as longer-term government bonds, aimed at pushing down long-term interest rates to encourage companies and individuals to borrow.

ETFs are similar to an index fund, but trade on the market like stocks.

The bank also said it would aim to boost the monetary base — the amount of currency in circulation including commercial bank deposits in BOJ reserves — by ¥60 trillion (US$632 billion) to ¥70 trillion annually.

The moves would see the BOJ “enter a new phase of monetary easing both in terms of quantity and quality,” as it pointed to a pickup in the economy, which has been hurt by a poor trade picture overseas.

“Japan’s economy has stopped weakening and has shown some signs of picking up,” it said.

Tsuyoshi Ueno, economist at NLI Research Institute, described the moves as a “huge regime change in monetary policy.”

“What the BOJ announced today met almost all policy measures that had been speculated in the market,” Ueno added.

Yoshikiyo Shimamine, executive chief economist at Dai-ichi Life Research Institute, said the announcement “went beyond market expectations.”

“Kuroda showed today that the Bank of Japan is now different from what it was in the past,” he added.

The news out of Tokyo sent the US dollar surging against the yen, providing a boost to Japan’s exporters who have been struggling under the weight of a strong currency.

The greenback surged to ¥95.22 after the announcement, from ¥92.94 earlier in the day, while the euro also jumped to ¥122.18 from ¥119.39.

The weakening yen also sent the Nikkei up 2.2 percent by the close, reversing losses earlier yesterday, although the currency’s tumble may renew criticism from abroad that Tokyo was intentionally driving down the value of its currency to help exporters.

The benchmark Nikkei 225 gained 272.34 points to 12,634.54, while the TOPIX rose 2.7 percent, or 27.33 points, to 1,037.76.