Japan’s central bank expanded its asset purchases in a surprise move yesterday to shore up sagging growth in the world’s No. 3 economy.
The Bank of Japan (BOJ) said it would increase its asset purchases by between ￥10 trillion and ￥20 trillion (US$90.7 billion and US$181.3 billion) to about ￥80 trillion (US$725 billion) annually.
The Nikkei 225 stock index jumped 5 percent and the US dollar rose 1.2 percent against the yen after the unexpected decision.
Photo: Bloomberg
Japan’s economic recovery remained in the doldrums in September, as household spending fell, inflation edged lower and unemployment ticked up, according to data released yesterday.
The central bank’s announcement highlights divergent fortunes among major economies.
The US Federal Reserve on Wednesday announced it was ending its own asset purchase program, known as quantitative easing, which it instituted after the global recession to help the US economy recover.
As that US$4 trillion program wound down, the Bank of Japan has come under pressure to increase stimulus to support growth as Japanese Prime Minister Shinzo Abe weighs approval of another sales tax hike next year.
The BOJ’s decision may encourage Abe to push ahead with the politically difficult choice. Surveys show more than 70 percent of the public are opposed to raising the tax, which is needed to help tame Japan’s swollen government debt.
A sales tax hike in April, from 5 percent to 8 percent, slowed the recovery that began in late 2012. Abe is due to decide before the end of this year whether to raise the sales tax by another 2 percentage points to 10 percent.
In addition to stepping up asset purchases, the central bank said it would triple its purchases of exchange-traded funds and real estate investment trusts.
It said the monetary loosening would continue as long as needed to attain an inflation target of 2 percent.
The bank’s main decisions on expanding the scope of monetary easing passed by a 5-4 majority, indicating differences of opinion among members of the bank’s policy board.
The central bank said in a statement it “will examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate.”
The bank’s announcement caught most analysts by surprise.
“We had expected the bank to announce additional stimulus only in 2015,” Marcel Thieliant, an economist with Capital Economics, said in a commentary.
Abe and the central bank have sought to spur inflation as a way of encouraging consumers and businesses to spend more and thus support faster growth.
Core inflation, excluding volatile food prices, was at 3 percent in September, down from 3.1 percent in August. Unemployment rose to 3.6 percent from 3.5 percent.
The government reported that household spending fell 5.6 percent from a year earlier in September, though it rose 1.5 percent from August. Household incomes, meanwhile, fell 6 percent from a year earlier in real terms, excluding inflation.
However, the data released yesterday showed inflation, excluding both food and energy prices, has remained flat at 2.3 percent since June.
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