Bank of Japan makes surprise $128bn stimulus programme

Tuesday 14th February 2012

In a surprise announcement, the Bank of Japan has said it will add a further 10 trillion yen ($128 billion) to an asset purchase programme and has set an inflation target.

The Bank said it would use the extra funds to purchase Japanese government bonds. The move follows criticism that Japan had been slower to respond to worsening global economic conditions than its counterparts.

In a move that has surprised the markets, the BOJ said it will set consumer inflation of one per cent as its price goal for the time being, an indication that it is committed to end deflation in the Japanese economy.

The central Bank expanded its asset purchase fund for the first time since October to revive an economy that shrank an annualized 2.3 percent last quarter.

The yen has been near record highs recently, which has severely hindered Japan's export-led economy. The currency’s strength is hurting exporters such as Sony Corp, which has more than doubled its annual loss forecast to 220 billion yen.

The Japanese economy has been hurt by various factors over the past year. The earthquake and tsunami badly hit the country’s infrastructure, including the near-destruction of a nuclear power station.

At the same time, demand for Japanese goods has fallen in some of its biggest markets such as the eurozone, not least due to the economic issues in the region.

The Bank of Japan said these issues “continue to remain a challenge for growth”.

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