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BoJ in stimulus drive

October 31, 2014

Japan's central bank has surprised analysts by reinforcing its monetary easing program aimed at fueling growth. The move came just after the US Federal Reserve's decision to wind down its own stimulus scheme.

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Bank of Japan building in Tokyo
Image: AP

The Bank of Japan (BoJ) beefed up its monetary easing scheme Friday in a surprise move aimed at kick-starting the economy and fighting deflation.

BoJ officials said they would add up to 20 trillion yen ($182 billion, 144 billion euros) to the central bank's current asset-buying program, bringing it to 80 trillion yen annually.

Unlike the US, where the Fed is winding down its stimulus program on solid third-quarter GDP growth, the economy in Japan contracted by 7.1 percent on an annualized basis between April and June, the steepest quarterly drop since the 2011 tsunami disaster.

The BoJ on Friday revised down the nation's economic growth outlook for the current financial year to 0.5 per cent from 1 per cent estimated in July.

Deflation worries prevail

The central bank reported Friday's decision passed by a narrow five to four majority vote, reflecting misgivings by some about the impact of monetary easing.

"On the price front, somewhat weak developments in demand following the sales tax hike and a substantial decline in crude oil prices have been exerting downward pressure recently," the lender said, justifying the move.

Yen weakness seen as goal of Japanese monetary policy by some

The decision sent the national currency sinking to 110.9 against the greenback to levels not seen since January 2008, while Tokyo's Nikkei-225 stock index soared by over 5 percent.

hg/ng (Reuters, dpa, AFP)