The Bank of Japan on Friday decided to add further monetary stimulus to the economy through enhanced purchases of the government bonds, stepping up its efforts to boost economic growth and fight deflation.
The central bank's Policy Board unanimously voted to increase the total size of its asset purchase program by JPY 5 trillion with some changes in its composition, which will take the total to JPY 70 trillion by end-2013.
At the same time, the BoJ reduced the maximum outstanding amount of the Bank's fixed-rate funds-supplying operation against pooled collateral with a six-month term by JPY 5 trillion.
The size of the total asset purchase program for end-2012 will remain at JPY 65 trillion.
An additional JPY 10 trillion in purchase of Japanese government bonds (JGBs) will take the size of the asset purchases, excluding the credit facility, to JPY 40 trillion by end-2013. Asset purchase target for the end-2012 was enhanced to JPY 35 trillion from JPY 30 trillion announced earlier.
By end-2012, purchases of JGBs will be increased by JPY 5 trillion to JPY 24 trillion and another JPY 5 trillion will be added in the following year. The bank also extended the maturity of bonds it buys to 3 years from two years.
The central bank also decided to increase the purchases of exchange traded funds (ETFs) and Japan real estate investment funds (J-REITs) by JPY 200 billion and JPY 10 billion respectively.
As expected, the benchmark uncollateralized overnight call rate was retained at 0-0.1 percent.
The central bank noted that the risk of the European debt problem causing financial market turmoil has decreased and the U.S. economy has continued to recover at a moderate pace. As a result, the Japanese economic activity is showing signs of "shifting towards a pick-up phase as positive developments have become widespread."
Japan's economy is expected to return to a moderate recovery path in the first half of fiscal 2012. The central bank now forecasts 2.3 percent economic growth in fiscal 2012, faster than 2 percent growth seen in January. The growth outlook for 2013 was lifted slightly to 1.7 percent from 1.6 percent previously.
The bank expects inflation to gradually rise to a range of above 0.5 percent and less than 1 percent as the aggregate supply and demand balance improves.
"It will likely be not too long before the rate reaches the Bank's "price stability goal in the medium to long term" of 1 percent," BoJ said.
Core consumer prices in Japan increased 0.2 percent on year in March, faster than February's 0.1 percent rise, government data showed Friday.
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