Japan Monetary Policy


Japan: Central Bank adds further stimulus

October 30, 2012

At its 30 October monetary policy meeting, the Bank of Japan (BoJ) unanimously decided to increase the total size of the Asset Purchase Program by JPY 11 trillion (USD 139 billion) to JPY 91 trillion (USD 1.1 trillion), in a decision expected by market analysts. Specifically, the BoJ boosted both the acquisition of treasury discount bills and the purchase of government bonds by JPY 5 trillion each, while increasing marginally the rest of the program. The move represents the second increase in the Bank's financial asset-buying program after the additional JPY 10 trillion added in the 18-19 September meeting. Moreover, the BoJ introduced the "Stimulating Bank Lending Facility", which will offer unlimited loans of up to 4-years to commercial banks at the uncollateralized overnight rate. The BoJ justified its decision stating that "overseas economies have moved deeper into a deceleration phase" and that "Japan's economy has been weakening somewhat. Meanwhile, in an exceptional joint statement, the Central Bank and the government have shown its commitment to "overcome deflation as early as possible and to return to a sustainable growth path with price stability". The Bank urged the government to strengthen Japan's growth potential, while the government expected the BoJ to further ease its monetary policy. In a separate decision, the Bank decided to leave the collateralized overnight call rate unchanged at between 0 and 0.1%, in a move widely expected by the market. The next monetary policy meeting is scheduled for 19 November.


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