ID :
112208
Thu, 03/18/2010 - 00:10
Auther :
Shortlink :
https://www.oananews.org//node/112208
The shortlink copeid
BOJ further eases monetary policy, doubles lending program+
TOKYO, March 17 Kyodo -
The Bank of Japan decided Wednesday to ease its ultraloose monetary policy
further by expanding its three-month funding operation introduced in December
to make good on its pledge to contain deflation.
While keeping its key interest rate on hold at a razor-thin 0.1 percent, the
central bank decided to double to 20 trillion yen the funds available to banks
for the three-month loan program in the face of constant pressure from the
government to do more in defeating deflation to ensure an economic recovery.
''We believe the step should contribute to ensuring the improvement in the
economy and prices,'' BOJ Governor Masaaki Shirakawa said at a press conference
after concluding a two-day policy meeting.
He added that the additional monetary easing is also aimed at helping lower
longer-term interest rates and propping up domestic demand, and that the BOJ
will continue to make contributions to supporting the economy through measures
it can take.
The government applauded the BOJ's move, with Prime Minister Yukio Hatoyama
saying, ''We welcome it.''
''The government anticipates the BOJ to be agile in defeating deflation,''
Hatoyama said, adding that the BOJ's latest easing measure is ''consistent with
such expectations.''
The BOJ's seven-member Policy Board was, however, split over the liquidity
expansion, with policymakers Miyako Suda and Tadao Noda dissenting from the
additional monetary easing at a time when the economy is expanding.
The Japanese economy is ''picking up,'' the BOJ said in a statement, keeping
its economic assessment from the previous month. The nation's economy has been
showing signs of a recovery, with real gross domestic product expanding at a
3.8 percent annualized pace in the last quarter of 2009, but prices have
continued to fall.
With the expansion of the lending facility, the BOJ will pump more liquidity
into the financial system with the aim to keep credit flowing in the economy
and help to beat deflation.
It is a ''critical challenge'' for Japan's economy to overcome deflation and
the BOJ intends to keep the ''extremely accommodative financial environment''
to this end, the BOJ said in the statement. ''The expansion of the measure to
encourage a decline in longer-term interest rates was also in line with this
principle.''
Under the loan program, the BOJ has been offering financial institutions
three-month loans at a fixed interest rate of 0.1 percent against collateral
including both government bonds and corporate debt.
Analysts, however, cast doubt on the effectiveness of the expansion of the
December lending program in ending deflation as the underlying cause of
deflation -- a lack of demand -- has yet to be solved.
Yasunari Ueno, chief market economist at Mizuho Securities Co., said the BOJ's
additional step is a ''demonstration'' that the central bank is not doing
anything to combat deflation.
''It appears the BOJ is trying to do something it can do, no matter whether the
move's effects are likely to be limited,'' he said, adding that it is hard to
justify the additional easing at this juncture when consumer sentiment on
prices is showing signs of improvement and the currency market is relatively
stable.
The BOJ decided on the funding scheme at an emergency policy meeting in
December on the heels of the yen's sharp appreciation to a 14-year high against
the U.S. dollar amid heightened concerns over debt problems in Dubai.
Prior to the latest policy meeting, Finance Minister Naoto Kan repeatedly
pressed the BOJ to do more in defeating deflation, as his ability to spur the
recovery is constrained by the nation's mammoth fiscal debt, which is
approaching 200 percent of GDP.
Kan has said he wants to see the nation out of deflation by the end of this
year and suggested setting up an inflation target.
The BOJ's expansion of the lending program came ahead of the March 31
expiration of an unlimited collateralized loan facility introduced in late 2008
at the height of the global financial crisis, and the expiration of the other
funding program is also behind the additional easing, Shirakawa said.
The BOJ governor said there is no ''miracle'' or magical measures that can beat
deflation, which the central bank expects to continue at least until the year
to March 2012.
''Of course, it is not that the additional step can immediately clear the
clouds over the economy,'' he said.
The BOJ said the pace of improvement in the nation's economy is likely to
remain ''moderate'' until around this fall.
The BOJ's Policy Board voted unanimously to keep the target rate for unsecured
overnight call money steady at 0.1 percent, a level where it has been since
December 2008.
==Kyodo
The Bank of Japan decided Wednesday to ease its ultraloose monetary policy
further by expanding its three-month funding operation introduced in December
to make good on its pledge to contain deflation.
While keeping its key interest rate on hold at a razor-thin 0.1 percent, the
central bank decided to double to 20 trillion yen the funds available to banks
for the three-month loan program in the face of constant pressure from the
government to do more in defeating deflation to ensure an economic recovery.
''We believe the step should contribute to ensuring the improvement in the
economy and prices,'' BOJ Governor Masaaki Shirakawa said at a press conference
after concluding a two-day policy meeting.
He added that the additional monetary easing is also aimed at helping lower
longer-term interest rates and propping up domestic demand, and that the BOJ
will continue to make contributions to supporting the economy through measures
it can take.
The government applauded the BOJ's move, with Prime Minister Yukio Hatoyama
saying, ''We welcome it.''
''The government anticipates the BOJ to be agile in defeating deflation,''
Hatoyama said, adding that the BOJ's latest easing measure is ''consistent with
such expectations.''
The BOJ's seven-member Policy Board was, however, split over the liquidity
expansion, with policymakers Miyako Suda and Tadao Noda dissenting from the
additional monetary easing at a time when the economy is expanding.
The Japanese economy is ''picking up,'' the BOJ said in a statement, keeping
its economic assessment from the previous month. The nation's economy has been
showing signs of a recovery, with real gross domestic product expanding at a
3.8 percent annualized pace in the last quarter of 2009, but prices have
continued to fall.
With the expansion of the lending facility, the BOJ will pump more liquidity
into the financial system with the aim to keep credit flowing in the economy
and help to beat deflation.
It is a ''critical challenge'' for Japan's economy to overcome deflation and
the BOJ intends to keep the ''extremely accommodative financial environment''
to this end, the BOJ said in the statement. ''The expansion of the measure to
encourage a decline in longer-term interest rates was also in line with this
principle.''
Under the loan program, the BOJ has been offering financial institutions
three-month loans at a fixed interest rate of 0.1 percent against collateral
including both government bonds and corporate debt.
Analysts, however, cast doubt on the effectiveness of the expansion of the
December lending program in ending deflation as the underlying cause of
deflation -- a lack of demand -- has yet to be solved.
Yasunari Ueno, chief market economist at Mizuho Securities Co., said the BOJ's
additional step is a ''demonstration'' that the central bank is not doing
anything to combat deflation.
''It appears the BOJ is trying to do something it can do, no matter whether the
move's effects are likely to be limited,'' he said, adding that it is hard to
justify the additional easing at this juncture when consumer sentiment on
prices is showing signs of improvement and the currency market is relatively
stable.
The BOJ decided on the funding scheme at an emergency policy meeting in
December on the heels of the yen's sharp appreciation to a 14-year high against
the U.S. dollar amid heightened concerns over debt problems in Dubai.
Prior to the latest policy meeting, Finance Minister Naoto Kan repeatedly
pressed the BOJ to do more in defeating deflation, as his ability to spur the
recovery is constrained by the nation's mammoth fiscal debt, which is
approaching 200 percent of GDP.
Kan has said he wants to see the nation out of deflation by the end of this
year and suggested setting up an inflation target.
The BOJ's expansion of the lending program came ahead of the March 31
expiration of an unlimited collateralized loan facility introduced in late 2008
at the height of the global financial crisis, and the expiration of the other
funding program is also behind the additional easing, Shirakawa said.
The BOJ governor said there is no ''miracle'' or magical measures that can beat
deflation, which the central bank expects to continue at least until the year
to March 2012.
''Of course, it is not that the additional step can immediately clear the
clouds over the economy,'' he said.
The BOJ said the pace of improvement in the nation's economy is likely to
remain ''moderate'' until around this fall.
The BOJ's Policy Board voted unanimously to keep the target rate for unsecured
overnight call money steady at 0.1 percent, a level where it has been since
December 2008.
==Kyodo
