Thursday, October 27, 2011

Japan Adds 5 trillion to Quantitative Easing Program

The Bank of Japan announced an expansion of its Asset Purchase Program (quantitative easing) of 5 trillion yen, to a new total of 55 trillion yen; with the increase designated for purchase of Japanese government bonds (JGBs).  The Bank said: "some more time will be needed to confirm that price stability is in sight and due attention is needed for the risk that the economic and price outlook will further deteriorate depending on developments in  global financial markets and overseas economies.  While steadily implementing its decision in August to enhance monetary easing, especially through the purchase of financial assets, the Bank deemed it necessary to further enhance monetary easing so as to ensure a successful transition to a sustainable growth path with price stability."

The Bank of Japan also held its monetary policy interest rate unchanged at a range of 0-0.10%, and previously announced additions to its quantitative easing program during its August meeting.  The Bank had previously changed its asset purchase program in March this year, when it added a further 5 trillion yen to its target.  Japan reported annual headline consumer price inflation of 0.2% in both August, July and June, and 0.3% in both May and April, as Japan finally begins to see some positive inflation figures.  

The Bank has previously forecast real GDP growth of 0.2-0.6% in fiscal 2011, and 2.5-3.0% in fiscal 2012.  Meanwhile, nominal GDP growth in Japan was recorded at -0.5% in June and -0.9% in March, placing it at -1% in both quarters on an annual basis.  The Japanese Yen (JPY) has gained around 7% against the US dollar so far this year; the USDJPY exchange rate last traded around 75.8


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