Corrects the second paragraph. The total size of the asset purchase program is JPY 65 trillion.
The Bank of Japan unexpectedly eased monetary policy on Tuesday by increasing the size of its asset purchase by JPY 10 trillion to JPY 30 trillion, after the economy contracted more than expected in the fourth quarter. At the same time, the central bank set a near-term target of 1 percent for the annual increase in the consumer price index.
With the latest move, the total size of the asset purchase program reached JPY 65 trillion. The increase in the program is earmarked entirely for the purchase of Japanese government bonds. The credit facility was unchanged at JPY 35 trillion.
The bank said that the amount outstanding of the program will be increased by about JPY 22 trillion from the current level of around JPY 43 trillion by the end of 2012.
Meanwhile, the bank set a consumer price target of 1 percent for the "time being", while judging "the price stability goal in the medium to long term to be within a positive range of 2 percent or lower in terms of the year-on-year rate of change in the consumer price index."
The price stability goal will be reviewed once a year in principle, the policy board said.
The benchmark uncollateralized overnight call rate was, meanwhile, left unchanged at around 0-0.1 percent. The BoJ said it will continue pursuing the powerful easing until it judges that the 1 percent goal is in sight.
Th policy board judged that Japan's economic activity has been more or less flat, mainly due to the effects of a slowdown in overseas economies and the appreciation of the yen.
According to official data, the Japanese economy contracted more than expected by 0.6 percent quarter-on-quarter in the fourth quarter of 2011, just three months after the country exited recession triggered by March's deadly earthquake.
The central bank said that the outlook for Japan's economy continues to entail high uncertainty regarding the prospects and outcomes of the European debt problem, the supply and demand balance of electricity and the effects of the yen's appreciation.
The bank said that the policy move was intended to further support recent positive developments from the financial side, overcome deflation and to better ensure the economy's return to a moderate recovery path.
Recent data from the Ministry of Finance has confirmed that the government and the Bank of Japan conducted stealth intervention in the currency market during the December quarter of 2011 to contain yen gains.
On October 31, when the yen climbed to a post-war high against the dollar, the total value of foreign exchange intervention operations reached a record JPY 8.07 trillion. After this move, the government and the central bank intervened in the currency market continuously during the first four days of November.
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