Japan: BoJ floods market with liquidity
March 14, 2011
At its latest monetary policy meeting, held on 14 March, just a few days after the earthquake, the Bank of Japan (BoJ) decided to inject a record amount of cash into money markets. While the Bank expects the economy to return to a moderate recovery path it considers that production is likely to decline and there is also concern that the sentiment of firms and households might deteriorate. Therefore, the Bank will provide ample funds sufficient to meet demand in financial markets, and also will encourage the collateralized overnight call rate to remain around 0 to 0.1 percent. In addition, the BoJ increased the amount of its Asset Purchase Programme from JPY 5 trillion (USD 62 billion) to JPY 40 trillion (USD 494 billion), which it expects to be completed by June 2012. Meanwhile, in a coordinated move, the G-7 decided to intervene in the foreign exchange markets to stem the rapid appreciation of the yen. In the wake of the earthquake, the yen soared due to concerns that Japanese investors would repatriate assets in order to pay for rebuilding.