Japan’s Central Bank unexpectedly moves to stimulate economy
The Bank of Japan will buy larger quantities of government debt in an effort to battle deflation.
After insisting for more than a year that its aggressive monetary policy was sufficient to revive Japan’s economy and end deflation, the Bank of Japan on Friday unexpectedly announced that it would increase the amount of money it pumps into the country’s financial markets by buying larger quantities of government debt.
The central bank surprised analysts and investors by expanding its program of bond buying — an initiative similar to the stimulus delivered by the Federal Reserve in the United States — to increase Japan’s monetary base by 80 trillion yen a year, or $734 billion, up from a previous range of ¥60 trillion to 70 trillion.
The Nikkei 225 stock average jumped by nearly 3 percent within minutes of the announcement and closed more than 4 percent higher, while the yen fell to its weakest level against the dollar in a month.
Mr. Abe’s handpicked central bank governor, Haruhiko Kuroda, dramatically expanded an existing bond-buying program at the central bank in April last year.
Friday’s decision amounted to an admission that his confidence was misplaced. While prices have in fact been rising, the Bank of Japan’s favored measure of consumer prices, which excludes the price of fresh food, has been stuck at just over 1 percent for months.
Weaker consumer spending after a sales-tax increase in April and the inflation-dampening effect of falling oil prices prompted the decision to ease, the central bank said.
The move was nonetheless contentious, with four out of nine of the bank’s policy board members voting against — a far closer margin than for any decision taken by the bank since Mr. Kuroda took over.
Source: NYT-Japan’s Central Bank unexpectedly moves to stimulate economy
