Business

Bank of Japan announces fresh stimulus to boost growth

  • 27 April 2012
  • From the section Business
yen notes
Image caption The Japanese central bank has been using the asset purchase programme to boost growth

The Bank of Japan (BOJ) has increased its stimulus programme for the second time in just over two months in a bid boost the country's economic growth.

The central bank said it would expand its purchase of Japanese government bonds by 10tn yen ($123bn; £76bn).

The move comes as Japan's economy continues to struggle amid a slowdown in key export markets such as the US and eurozone and weak domestic demand.

The BOJ also left its key interest rate unchanged between zero and 0.1%.

"The bank is trying to send a message that they are supporting the market and the economic recovery, just like they did in February," said Masamichi Adachi of JP Morgan Securities.

Deflation pressure

Unlike other economies in the region such as China and India where consumer prices have been rising, Japan has seen consumer prices falling in recent years.

Falling prices hurt the economy as consumers tend to put off their purchases in the hope that prices may go down even further.

The Japanese central bank has been trying to reverse the trend and has set a target of 1% consumer price growth.

However, data out on Friday showed that consumer prices in Japan rose by just 0.2% in March from a year earlier.

Excluding food and energy costs, which are highly volatile, consumer prices fell 0.5% from last year.

Analysts said the data indicated that the issue continues to remain a threat to the Japanese economy.

"The core consumer price index number shows that deflationary conditions are continuing... it shows what a difficult task the Bank of Japan faces," said Ayako Sera of Sumitomo Trust and Banking.

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