JAPAN: Bank of Japan eases monetary policy on heels on yen intervention

Record ID: 1515190

  • Title: JAPAN: Bank of Japan eases monetary policy on heels on yen intervention
  • Date: 5th August 2011
  • Summary: TOKYO, JAPAN (AUGUST 4, 2011) (REUTERS) BANK OF JAPAN BUILDING MORE OF BANK OF JAPAN BUILDING BANK OF JAPAN GOVERNOR MASAAKI SHIRAKAWA WALKING INTO NEWS CONFERENCE PHOTOGRAPHERS TAKING PICTURES (SOUNDBITE) (Japanese) BANK OF JAPAN GOVERNOR MASAAKI SHIRAKAWA SAYING: "The risks that a strong yen causes is that it affects the psychology of Japanese companies as well as
  • Embargoed: 19th August 2011 22:34
  • Keywords:
  • Location: Japan, Japan
  • Country: Japan
  • Topics: Business,Finance
  • Reuters ID: LVAE9MFDH75MYND0OFIQ2U8S41T9
  • Aspect Ratio: 4:3
  • Story Text: The Bank of Japan (BOJ) eased monetary policy by boosting its asset buying scheme on Thursday (August 4) at a rate review cut short by a day after Tokyo's solo intervention to weaken the yen.
    The decision, by a unanimous vote, was widely expected as the central bank had signaled that any easing of credit would take the form of an increase in the 10 trillion yen ($130 billion) asset buying programme.
    Japan intervened in the currency market earlier on Thursday to curb rises in the yen that officials fear threatened to derail the export-reliant economy's recovery from a slump triggered by a devastating earthquake in March.
    "The risks that a strong yen causes is that it affects the psychology of Japanese companies as well as accelerates a shift in their production. Taking these risks into account, a high yen at this moment is very costly," BOJ governor Masaaki Shirakawa told a news conference.
    The central bank decided to increase by 5 trillion yen the 10 trillion yen pool of funds established last year, and doubled just days after the March quake, to buy assets ranging from government bonds to corporate debt.
    It also topped up by 5 trillion yen a 30 trillion yen programme offering funds viae market operations at a fixed rate of 0.1 percent.
    As a result, the size of its fund for asset buying and market operations backed by collateral was topped up by 10 trillion yen, to 50 trillion yen. The BOJ hopes to achieve the 50 trillion yen target by the end of 2012.
    As widely expected, the BOJ maintained its benchmark policy rate at a range of zero to 0.1 percent.
    Japanese policymakers have repeatedly verbally warned markets against pushing the yen too high, fearing that sharp yen rises would threaten their forecast that the economy will resume a moderate recovery in autumn when it shakes off supply constraints from the quake.
    "While we are always taking the risks into account, we decided to act on policy this time as we took the consequences of the risks into account and decided that it warranted action," said Shirakawa.
    The BOJ's action follows a surprise interest rate cut by the Swiss central bank to ease buying pressure on its currency, which like the yen had been attracting funds switching out of the dollar because of fears of a U.S. credit downgrade and concerns about the health of the world's biggest economy.
    Japan's economy had been expected to pull out of a brief post-quake recession later this year but the yen's nearly 5 percent surge over the past month and signs of a cooling global economy cast doubt over that outlook.
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