BOJ eases policy to shore up confidence
Updated: 2011-03-14 16:22
TOKYO – Japan's central bank doubled its asset buying scheme to 10 trillion yen and pumped record funds into the banking system on Monday to shore up confidence in the economy hit by a triple blow of a massive quake, a tsunami and a nuclear emergency.
The Bank of Japan said its action was a pre-emptive step to counter worsening of business sentiment after markets swooned at the shock of Friday's 8.9 magnitude earthquake and a tsunami that may have killed more than 10,000 and has left millions without power, water or homes.
The central bank said it was still sticking to its view that the world's third largest economy would resume its moderate recovery, though warned about a likely drop in economic output after the disasters and vowed to do whatever necessary to limit the economic fallout.
"But this time's earthquake has inflicted damage in a wide area. Output is likely to fall for some time. We are also worried that corporate and household sentiment will worsen," the BOJ said in a statement after its board voted 8 to 1 to expand its 5 trillion fund pool put in place last October to support Japan's recovery after the global economic crisis.
In an unanimous vote the board also kept, as expected, its benchmark rate at 0-0.1 percent.
While the fund increase came as a surprise to some economists, some said the central bank could have done more.
"My initial impression is that the BOJ could have done more. Its traditionally reserved stance on policy easing remains in place even after the massive earthquake," said Masamichi Adachi, senior economist at JPMorgan Securities Japan.
"The BOJ also kept its economic assessment unchanged. The bank thus seems to be not fully taking account of strong uncertainty shrouding Japan."
Tokyo's stocks plunged more than 6 percent after the market reopened on Monday as investors tried to gauge the huge economic cost of Friday's quake and tsunami.
Moody's ratings agency said it saw no major disruption to Japan's payment system but that the economic fallout from the disaster appeared greater than initially expected, even though it was still waiting for a full assessment of the damage.
"The economic consequences appear to be greater than we perhaps originally expected on Friday," Tom Byrne, Moody's senior vice president, said.
($1 = 81.915 Japanese Yen)
A massive 8.8 magnitude quake hit the northeast coast of Japan on March 11,2011.
Lawmakers and political advisers gather in Beijing to discuss major issues.
Worker scarcity is no longer confined to eastern areas, minister says.