Thursday 27 July 2017

Bank of Japan considers short-term cash injection

Lily Nonomiya and Mayumi Otsuma

The Bank of Japan may today inject more short-term cash into the banking system after the nation's most powerful earthquake on record, while keeping its asset-purchase plans unchanged as officials gauge the longer-term effect on the world's third-largest economy.

Governor Masaaki Shirakawa told reporters late yesterday he was ready to unleash "massive" liquidity starting this morning in Tokyo, as the Bank of Japan (BOJ) seeks to assure financial stability.

Economists said officials would likely decide to keep longer-term credit programmes at a total of 35 trillion yen (€30bn) when they meet today.

The bank's main interest rate has already been cut to almost zero as policymakers last year sought to end the nation's deflation.

"Monetary policy will be unchanged, but they will probably pledge to provide ample liquidity," said Takehiro Sato, chief Japan economist at Morgan Stanley MUFG Securities in Tokyo.

Policymakers may also "establish an emergency lending facility to help financial institutions in Tohoku", the northern region most damaged by the catastrophe, he said.

Mr Shirakawa and his board could opt to accelerate asset purchases, including government bonds and exchange-traded funds, within the existing credit programmes, particularly if the yen climbs and stocks tumble, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co in Tokyo.

The economic hit from the March 11 quake will depend on how long it shuts down factories and the distribution of goods and services.

Japan's currency rose 1.4pc to 81.84 per dollar on March 11 amid prospects for Japanese investors to repatriate assets, bringing its gain in the past year to 10pc.

Irish Independent

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