— Correcting 5th Paragraph To 8-To-1 Vote, Instead of 9-To-1
TOKYO (MNI) – The Bank of Japan’s decision on Monday to inject cash
into the banking system at a super-low overnight rate for six-month
funding follows an unusually specific call from Prime Minister Naoto Kan
to conduct “flexible” monetary policy.
The BOJ’s decision made at a hurriedly called extraordinary policy
board meeting also comes on the eve of the government’s plan to announce
on Tuesday the framework for its new fiscal stimulus package focused on
creating jobs and easing the pain of a rapid rise in the yen inflicted
on export-oriented small businesses.
“The bank believes that the monetary easing measure, together with
the government’s efforts, will be effective in further ensuring Japan’s
economic recovery,” the BOJ said in a statement.
The central bank noted that the growing uncertainty over U.S.
economic growth prospects as well as “unstable” foreign exchange and
stock markets had prompted it to take preemptive action now.
The BOJ board on Monday voted unanimously to leave its target for
the overnight lending rate among commercial banks at 0.1%, while
deciding, in an 8-to-1 vote, to expand its funding program at the
bargain overnight rate by starting a six-month operation totaling Y10
trillion.
The BOJ board also decided to continue its three-month funding
operation at the policy rate, leaving its scale at Y20 trillion.
By adding the six-month tool, the BOJ said it “will encourage a
decline in market interest rates and further enhance easy monetary
conditions.”
BOJ Governor Masaaki Shirakawa told reporters after the meeting
that today’s credit easing was also influenced by his “important”
exchanges with U.S. Federal Reserve Chairman Ben Bernanke, European
Central Bank President Jean-Claude Trichet and other central bank chiefs
at the annual Jackson Hole economic policy symposium hosted by the
Federal Reserve Bank of Kansas City.
The governor cut short his visit in the U.S., returning to Tokyo on
Sunday evening so he could call a board meeting on Monday to make a
swift decision as the strong yen and weak share prices threatened to
hurt business and consumer sentiment.
He stressed that the BOJ board made its own decision, but added
that the policymakers also had in mind the government’s move to draft
basic plans for its economic stimulus package on Tuesday.
The government’s new economic package is expected to include
measures to help new graduates find jobs through trial hire and
internship programs, support people living under the poverty line and
back small businesses’ investment in technological development.
In order to support consumer spending, the government also plans to
extend the reward program for building ecologically friendly houses and
enhancing the energy efficiency of existing homes. The program for such
renovations will end next March and that for the construction of
single-family houses will finish June next year.
After the last policy meeting on Aug. 9-10, Shirakawa told
reporters that the BOJ board still believes that upside and downside
risks to Japan’s sustained economic growth are largely balanced despite
signs of a slower U.S. recovery and the recent appreciation of the yen.
He also said the economic climate for Japan had improved since last
November, when the yen firmed past Y85 to the dollar in the aftermath of
the Dubai financial crisis, posing a threat to an emerging recovery.
tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
[TOPICS: M$J$$$,M$A$$$,MGJ$$$,MMJBJ$,MT$$$$]