Bank of Japan Ramps up Monetary Stimulus
The Bank of Japan (BoJ) has unexpectedly acceded to calls for it to expand its already aggressive monetary stimulus programme, in order to support the country’s economic revival plan.
In a statement the BoJ said that it will now make asset purchases at an annual pace of around 80 trillion yen (JPY), an increase from the previous JPY60-70 trillion level it has targeted since April 2013.
The central bank has pursued this goal in a bid to pull Japan out of the deflation that has long undermined corporate confidence and prompted consumers delay major purchases as a hangover from the late-1990s banking crisis.
However, the latest decision was far from unanimous, with five BoJ board members voting in favor of additional stimulus, while four voted against the proposal.
The move follows signs that early gains from prime minister Shinzo Abe’s economic revival campaign, dubbed ‘Abenomics’, have faded. Consumers rushed to make big purchases in the first quarter of 2014 before a sales tax hike kicked in last April, but the level fell away after it took effect.
Data shows the BoJ is far from achieving the 2% inflation target it had set for next year. In September, core consumer price inflation in Japan, excluding the effects of the sales tax hike, slipped to 1%. The bank said there was a risk Japan’s “deflationary mindset” might not reverse unless it took further action.