The Bank of Japan on Wednesday announced a fresh round of stimulus to revive the economy by expanding the asset purchase by another JPY 10 trillion. The central bank also cut its assessment of the economy, saying the recovery is "pausing."
The total size of the program was lifted to JPY 80 trillion following an additional JPY 5 trillion purchase authorization each for Japanese government bonds and treasury discount bills.
The decision that came close on the heels of Federal Reserve's announcement of a third round of quantitative easing was passed unanimously by the Monetary Policy Board.
The asset purchase target now stands at JPY 55 trillion, up from JPY 45 trillion previously. The credit facility was unchanged at JPY 25 trillion.
In addition, the central bank extended the intended timescale for completing the asset purchases till the end of December 2013 compared to its previous deadline of end of June 2013. Additional purchases of T-Bills, however, will be completed by end-June 2013.
Through these measures, the amount outstanding of the Program will be about JPY 65 trillion by around the end of 2012, about JPY 75 trillion by around the end of June 2013, and about JPY 80 trillion by around the end of 2013.
At the same time, the bank decided to remove the minimum bidding yield, currently at 0.1 percent per annum, for the outright purchases of JGBs and corporate bonds in order to ensure smooth purchase.
As expected, the benchmark uncollateralized overnight call rate has been kept unchanged at 0-0.1 percent by a unanimous vote.
Meanwhile, the BoJ downgraded its assessment of the economy, saying that "the pick-up in economic activity has come to pause" reflecting developments in overseas economies.
The central bank noted that overseas economies have moved somewhat deeper into a deceleration phase. "In global financial markets, while investor risk aversion on the back of the European debt problem has abated somewhat, particular attention should be given to developments in these markets."
The year-on-year rate of change in the CPI is expected to remain at around zero for the time being, the bank said, adding an earlier fall in crude oil prices has been exerting downward pressure.
A government report this month suggested that the modest recovery experienced by the Japanese economy in the past months has halted. Cutting its economic assessment for a second consecutive month, the Cabinet Office said in its monthly report that the recovery is "pausing" due to a slowdown in global economic activity.
Some of the world's major central banks recently ramped up their efforts to boost growth as the Eurozone debt crisis continued unabated. The ECB announced at its September Governing Council meeting its decision to embark on "outright monetary transactions" or OMTs, which will allow the bank to purchase sovereign bonds in the secondary markets.
The Federal Reserve unveiled its QE III program through its decision to buy $40 billion of agency mortgage-backed securities every month.
by RTT Staff Writer
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