The Bank of Japan has taken an additional monetary easing measure, including expanding its asset-purchase fund by ¥11 trillion to a total of ¥91 trillion and keeping its key short-term interest rate at around zero to 0.1 percent. It will loan funds at an annual interest rate of 0.1 percent to financial institutions without limits.
The asset-purchase fund expansion follows a similar decision in September to increase the fund by ¥10 trillion to a total of ¥80 trillion. For the first time since April-May 2003, the BOJ has taken monetary easing steps for two consecutive months. Behind this is the central bank's judgment that the Japanese economic recovery is on the brink of losing steam.
But the BOJ's monetary easing step is too small to have a significant impact. It needs to take a bold step so that enterprises, investors and ordinary people will have high expectations of the Japanese economy, which is suffering not only from the slowdown of overseas economies due to the European sovereign debt crisis but also from deterioration of economic ties with China due to the territorial dispute over the Senkaku Islands.