Bank of Japan OKs $119 bln stimulus

TOKYO - Agence France-Presse

A woman walks past the Bank of Japan building in Tokyo. The bank has extended its asset purchase program by $119 billion after LDP’s poll victory. REUTERS photo

The Bank of Japan (BoJ) yesterday ramped up its offensive to power the world’s third-largest economy as it faces heavy pressure from the country’s incoming government to loosen its monetary policy.

The move to expand an asset-buying program, its main policy tool, by 10 trillion yen ($119 billion) to 101 trillion yen came days after the conservative Liberal Democratic Party won a weekend election promising to boost spending and pressure the central bank for aggressive action.

The BoJ’s last scheduled meeting of the year had been widely seen as a test of its resilience to outside pressure from lawmakers. The move was described as “good” by a senior LDP official.

‘Reflecting winning party’s policies’

But the party’s strong-arm tactics may have played a role in the BoJ’s latest easing since the government has the power to appoint senior bank officials, said Keiji Kanda, economist at Daiwa Institute of Research. “Even though the BoJ should be independent from politics, it cannot ignore political pressure completely,” Kanda said.

“The bank is now reflecting the LDP administration’s intentions in its policies, which could be interpreted as the bank giving in to the pressure from the political side.” Kanda added the move marked the BoJ’s third major policy move since September after its counterparts in Europe and the U.S. ushered in huge measures to battle slowing growth.

Instead, it cited a slowing global economy and made no direct mention of a two-percent inflation target demanded by incoming Prime Minister Shinzo Abe. The bank kept interest rates unchanged at between zero and 0.1 percent and said it would look at reviewing its inflation target.

“Overseas economies remain in a deceleration phase,” said a bank statement, repeating its view the economy would remain weak “for the time being.” The BoJ “judged it appropriate to undertake further aggressive monetary easing policies,” it added.