Kyodo News) JAPAN OUT, MANDATORY CREDIT, NO LICENSING IN CHINA, HONG KONG, JAPAN, SOUTH KOREA AND FRANCE, Associated Press
TOKYO — Japan is making a sweeping shift in its monetary policy, aiming to spur inflation and get the world's third-largest economy out of a long, debilitating slump.
Bowing to demands from Prime Minister Shinzo Abe for more aggressive monetary easing, the Bank of Japan announced Thursday a policy overhaul intended to double the money supply and achieve a 2 percent inflation target at the "earliest possible time, with a time horizon of about two years."
BOJ governor Haruhiko Kuroda described the scale of monetary stimulus as "large beyond reason," but said the inflation target would remain out of reach if the central bank stuck to incremental steps.
"We'll adjust without hesitation if need be, while monitoring economic and price conditions," he said.
The BOJ is joining the U.S. Federal Reserve and other major central banks in soaking the economy in money in hopes of getting corporations and consumers to begin spending more in a virtuous cycle that would put growth back on track after two decades of malaise.
The central bank said it intended to "drastically change the expectations of markets and economic entities."
Financial markets, which had feared Kuroda might not live up to expectation for bold steps, reacted with relief. The Japanese yen, which was trading at about 92.8 yen per U.S. dollar, dropped to about 95.5 yen per dollar after the announcement. The benchmark Nikkei 225 stock index rebounded from negative territory to close 2.2 percent higher.
"By committing today to meet a 2 percent inflation target in two years, Gov. Kuroda can justifiably claim to have set the Bank of Japan on a new path," said Mark Williams of Capital Economics.
"But while markets have welcomed the announcement, the credibility of this pledge is soon likely to be called into question," he said in a commentary.
Kuroda has pledged to do what he must to meet the inflation target within two years. Thursday's decision after a two-day policy meeting makes that central bank policy. Signaling a consensus behind Kuroda, most items agreed upon received unanimous support from the nine-member board.
The policy shift is a coup for Abe, whose Liberal Democratic Party needs to make headway in reviving the economy before an upper house parliamentary election in July. The LDP is hoping for a strong enough mandate to push ahead with other items on their wish list, such as politically difficult economic and educational reforms and changes to the constitution to give Japan's military a higher profile.
Economy minister Akira Amari, who attended the policy meeting, praised Kuroda, giving him "very high marks,"
More aggressive monetary easing is a top priority, along with increased public spending to help perk up demand and reforms to make the economy more competitive in the long-run.
Abe had accused Kuroda's predecessor Masaaki Shirakawa, who stepped down on March 19, of balking at undertaking bold enough monetary easing to get the economy back on track. The steps announced Thursday under the first policy meeting chaired by Kuroda exceeded expectations in that regard.
"The first step is to get out of deflation and get a much higher nominal growth rate," Kozo Yamamoto, a senior lawmaker in Abe's Liberal Democratic Party, said Wednesday. A doubling of the money supply was needed to achieve that aim, he said.
The BOJ's policy reforms appear to be a major concession to government demands, despite the bank's ostensible autonomy.
- Bill Cosby said he got drugs to give women...
- 25 of the craziest — and cutest —...
- Bakery ordered to pay $135,000 for mental,...
- 2 Americans, 1 Briton gored in 1st Pamplona...
- Idaho's gay marriage ban remains in state...
- Federal, Indiana authorities raid home of...
- Thousands of birds abandon eggs, nests on...
- Pope puts family first at outdoor Mass in...
- Bakery ordered to pay $135,000 for... 81
- Idaho's gay marriage ban remains in... 38
- Did the news media show bias in its... 24
- Obama's counterterrorism policy facing... 22
- Ten Commandments decision prompts... 19
- Catholic leaders press GOP to heed pope... 15
- Rubio, Christie planning sleepover with... 12
- Clinton says she takes a 'backseat to... 11