The Bank of Japan (BOJ) eased monetary policy on Wednesday by boosting its asset-buying programme, as prospects of a near-term recovery in the world’s third largest economy faded due to weakening exports and prolonged slowdown in China.
The decision came hard on the heels of major quantitative easing announced by the US Federal Reserve last week, and amid worries that a territorial dispute with China, Japan’s biggest trading partner, will damage exports even more.But, BOJ governor Masaaki Shirakawa stressed that the move was prompted by recent disappointing data, not the Fed’s action, while the anti-Japanese protests in China played no part in the decision to ease.
“Overseas economies are slowing more than we anticipated, which is why we downgraded Japan’s economic view,” Shirakawa said.
“Japan’s economic recovery could be delayed by about half a year,” he stressed.
The BOJ increased its asset buying and loan programme, currently its key monetary easing tool, by 10 trillion yen ($127 billion) — double the usual amount — to 80 trillion yen, with the increase earmarked for purchases of government bonds and treasury discount bills. Standing over $1 trillion, the total stimulus is now almost a fifth of Japan’s economy.
The yen slipped to a one-month low, cash bonds rose and Tokyo’s Nikkei stock average hit a four-month high on the decision to offer the bigger-than-expected stimulus, in a move that came a month before many market players had expected it.
The BOJ cut its assessment of the economy to say its activity was pausing and projected growth to stay flat for now. It also took out a line forecasting a moderate economic recovery ahead. The BOJ is due to release next month revised long-term growth forecasts that are expected to show a sustained end to deflation is distant.