• Bloomberg, Kyodo


The Bank of Japan on Tuesday added to monetary stimulus for the second time in two months, the fastest pace of easing in nearly a decade, as it moved to shore up an economy at risk of contraction.

The central bank expanded its asset-purchase fund, its main policy tool, by ¥11 trillion, bringing the total to ¥91 trillion in a widely expected move, while keeping its key short-term interest rate steady at around zero to 0.1 percent.

BOJ Gov. Masaaki Shirakawa may face pressure to keep easing after data released Tuesday showed the steepest fall in industrial output since last year’s Great East Japan Earthquake, adding to the likelihood of an economic contraction.

Economy minister Seiji Maehara attended his second BOJ meeting in a month Tuesday, saying before the gathering that the bank is not doing enough to end deflation.

“There is a high chance that the BOJ will have to ease again in January or February, considering the political pressure and the slowing economy,” said Chotaro Morita, chief strategist for fixed income at Barclays PLC in Tokyo.

The BOJ expanded its asset-purchase fund by ¥10 trillion on Sept. 19, making Tuesday the first time since May 2003 that it has loosened policy twice in two months.

“It’s unusual for the BOJ to conduct easing for two straight months, but Shirakawa needs to take forward-looking policies to prevent Japan’s contraction from worsening,” said Mari Iwashita, a bond strategist at SMBC Nikko Securities Inc.

On the outlook for the economy, the BOJ said it expects the core consumer price index to increase 0.8 percent in fiscal 2014, below its medium-term price stability goal of 1 percent year-on-year growth.

The BOJ lowered its forecasts for economic growth in fiscal 2012, saying it is expected to grow 1.5 percent in the current business year through March in terms of real gross domestic product, compared with an earlier forecast of 2.2 percent expansion.

In fiscal 2013, inflation-adjusted GDP will increase 1.6 percent, slightly slower than the 1.7 percent projected in July, the BOJ said.

The bank also announced it will offer unlimited loans at low interest rates to lenders to try to boost credit demand among companies and households.

The money will be for terms of up to four years and based on the overnight call rate, currently 0.1 percent, the BOJ said.

Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. and a former BOJ official, said the latest move is similar to efforts by the Bank of England to fuel lending.

“This is aggressive credit easing,” Kanno said.

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