Japan central bank decides on additional monetary easing

Feb 14, 2012, 4:13 GMT

Tokyo - The Bank of Japan said Tuesday that it had decided to expand an asset purchase programme to about 65 trillion yen (838 billion dollars) from 55 trillion yen to help boost the nation's economy amid the yen's rise and global economic problems.

The increase is earmarked for the purchase of Japanese government bonds, the central bank said after a two-day policy meeting.

The bank also set its price stability goal, aiming to stimulate a 1.0-per-cent increase in the consumer price index, to combat the deflation which has affected the country for over a decade.

'The goal of overcoming deflation will be achieved through such efforts to strengthen growth potential and support from the financial side,' the bank said.

It made the announcement amid mounting pressure to do more to prop up the economy after the government said Monday that gross domestic product figure for the October-December quarter fell at an annualized pace of 2.3 per cent.

For 2011, the economy contracted 0.9 per cent partly due to the March 11 earthquake, tsunami and nuclear crisis at the Fukushima Daiichi Nuclear Power Station.

Just as many Japanese manufacturers started to recover from the disaster in the country, their supply chains were disrupted by the flooding in Thailand in the third quarter. They were also hurt by the strong currency and the eurozone debt crisis.

'The outlook for Japan's economy continues to entail high uncertainty regarding the prospects and outcomes of the European debt problem, the supply and demand balance of electricity and the effects of the yen's appreciation,' the bank said.

The yen was hovering around the mid-77-yen range to the dollar Tuesday, compared with about 83 yen a year ago. A strong yen makes Japanese goods more expensive overseas and hurts repatriated revenues of exporters.

Toyota Motor Corp said last week that its net profit declined 13.5 per cent for the October-December quarter from a year earlier while Sony Corp posted a net loss of 159 billion yen in the quarter.

The electronics giant added it expected to end the current financial year in the red for the fourth straight year, with a net loss of 220 billion yen.

The bank also voted unanimously to hold its key interest rate at zero to 0.1 per cent as expected.