BOJ augments asset buying scheme again

TOKYO - Reuters

Bank of Japan Governor Masaaki Shirakawa speaks at a news conference in Tokyo April 27. The central bank’s policy easing is aimed at supporting positive momentum in the economy, he says. REUTERS photo

The Bank of Japan (BOJ) boosted its asset-buying scheme by a further 10 trillion yen ($124 billion) on April 27 and pledged to buy longer-term government bonds in a move seen as aimed at convincing both impatient politicians and investors of its resolve to pull the economy out of deflation.

The policy easing came at the top of an expected 5-10 trillion yen range and initially impressed markets, pushing the yen lower. The central bank’s decision to buy more exchange-traded funds (ETFs) and real-estate linked funds also helped lift Tokyo shares. But the yen later crept back up and stocks slipped as some market players saw the BOJ’s decision to give itself more time to hit the bond-buying goal as a sign that central bankers themselves had doubts about how much good their action would do for the economy.

“The leopard doesn’t change its spots. It [the BOJ] doesn’t view monetary accommodation as a cure capable of reversing Japan’s deflation,” said Tim Condon, chief Asia economist at ING in Singapore.
“They seem motivated by politics and political pressure in these last couple of moves ... so I think they will do the minimum that they feel they are forced to do.”

The BOJ’s second easing in just over two months comes at a time when the economy is picking up and was seen mainly as symbolic response to politicians’ calls for more efforts in battling deflation that has dogged Japan for over a decade, depressing consumption and business investment.

Some analysts questioned the scale of the move, saying the BOJ actually has not committed to expand its balance sheet or accelerate the pace of asset purchases that much.