BoJ announces further monetary easing measures

The Bank of Japan on Thursday said it would expand by 10 trillion yen a scheme to buy assets and boost liquidity to help safeguard the nation's post-quake recovery from the impact of a strong yen. The move came a few hours after Tokyo launched a currency market intervention in an effort to tame the surging Japanese unit, whose strength erodes the profits of exporters. The central bank shortened its scheduled two-day meeting that was due to conclude on Friday to synchronise its move with the government's yen-selling. BoJ officials, including Governor Masaaki Shirakawa, have repeatedly expressed concerns that the yen's steep rise may weigh on exports and corporate profits, as well as business sentiment. In what it described as a move to "enhance monetary easing", the BoJ will expand a 40 trillion yen ($511 billion) scheme to buy securities and supply funds by a further 10 trillion yen. The bank's asset purchase fund, a key policy tool it uses to buy Japanese government bonds, corporate bonds and exchange traded funds, will be expanded to 15 trillion yen from 10 trillion yen. It also boosted a credit facility by 5 trillion yen to 35 trillion. "The bank deemed it necessary to further enhance monetary easing, thereby ensuring a successful transition from the recovery phase following the earthquake disaster to a sustainable growth path with price stability," the BoJ said in a statement. It is the first time the bank has expanded its asset purchase fund since the aftermath of the March earthquake, when it injected a record amount of cash into the banking system to battle plunging share prices and a surging yen. The bank also said its board had voted unanimously to keep its key rate unchanged between zero and 0.1%. The yen plunged in Tokyo trade Thursday to 79.30 to the dollar at 0550 GMT from 76.99 earlier in the day. But analysts have questioned how effective Thursday's intervention will be, given that the yen's strength has been due to continued weakness in currencies such as the dollar and the euro amid fears for the US and Eurozone economies. A deal to raise the US debt ceiling and avoid default this week did not relieve recent pressure on the greenback, with investors' attention on signs of a weakening US economy and the looming threat of a downgrade. "Concern over fiscal consolidation has note dissipated in financial markets even after the settlement of the debt ceiling problem and views on the economic outlook have recently become more cautious," the central bank said.