Japan's central bank will inject more than 50 trillion yen in new funds over the next 12 months aimed at boosting economic growth and will review its monetary policy goals next month, fueling speculation that it will raise its target for inflation.
The Bank of Japan (BOJ), which launched its asset purchase program in October 2010, said it would increase the size of the program by a further 10 trillion yen to about 101 trillion, buying 5 trillion yen of Treasury discount bills and 5 trillion worth of Japanese government bonds.
The additional purchases over the next 12 months, inclusive of those already decided, will amount to about 36 trillion. In addition, the BOJ regularly buys bonds at the pace of 21.6 trillion annually.
Under the Stimulating Bank Facility, which was launched in late October, the bank expects lending to reach more than 15 trillion yen. The new facility aims to provide long-term funds at a low interest rate, without any limit, to financial institutions at their request.
Combining these two programs, the BOJ said the amount outstanding would exceed 120 trillion yen.
The BOJ also continued to hold its overnight call rate steady at zero to 0.1 percent, the level it has been at since December 2008.
The BOJ's expansion of its quantitative easing program was largely expected with Japan's economy feeling the full effects of Europe's crises and its economy expected to remain weak for a while. Inflation is also expected to remain very low.
Japan's Gross Domestic Product contracted by 0.9 percent in the third quarter from the second quarter for annual shrinkage of 3.5 percent. Consumer prices fell by 0.4 percent in October, the fifth month in a row of deflation.
"Based on these economic and price developments, the Bank of Japan judged it appropriate to undertake further aggressive monetary easing in order to prevent Japan's economy from deviating from the path of returning to a sustainable growth path with price stability," the BOJ said.