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Japan’s central bank goes for growth

The Bank of Japan has unveiled a stimulus plan that is its most determined effort yet to end years of economic stagnation.

Following the example of the Federal Reserve in the United States, the Japanese central bank has made an open-ended commitment to buying government bonds.

It has also given in to government pressure to introduce policies that will push inflation higher, to try to get the Japanese spending again.

The country is currently in recession for the third time in five years.

The decision to adopt asset buying with no end date exceeded market expectations, analysts said. But in Tokyo shares fell and, after an initial selloff, the yen rose. That was due to investor disappointment that the expanded stimulus would not start until 2014.

“They’ve gone further than I thought by introducing the open-ended plan,” said Joseph Capurso, currency strategist at Commonwealth Bank of Australia in Sydney.

“What surprises me is they won’t start until 2014. That’s very odd and different from what the Federal Reserve did, which was immediate,” he said.

Having slashed interest rates close to zero, the BOJ’s policy is the latest unorthodox effort by a leading central bank to try to boost an otherwise weak recovery from the global financial crisis and, in Japan’s case, overcome more than a decade of deflation.

Copyright © 2014 euronews

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