BOJ Adds to Monetary Easing After Contraction

The Bank of Japan added to monetary easing after exports tumbled and the economy contracted by more than forecast in the fourth quarter. Governor Masaaki Shirakawa’s board unexpectedly expanded an asset-purchase program to 65 trillion yen ($835 billion) from 55 trillion yen, including a credit loan facility, and set a price stability goal of 1 percent inflation. The central bank maintained the overnight lending rate at between zero and 0.1 percent. Drags on growth span deflation, a yen close to post World War II highs against the dollar, and power-plant shutdowns after last year’s earthquake, tsunami and nuclear crisis. Besides the easing measures, the economy may get a boost this quarter from reconstruction work and a rebound in manufacturing as disruptions from floods in Thailand fade. “Japan’s economy will gradually recover as reconstruction demand takes hold and overseas economies pick up,” Kiichi Murashima, chief economist at Citigroup Global Markets Japan Inc., said before today’s announcement. The BOJ “is expected to implement further easing if the yen rises sharply,” he said. Boosting an asset-purchase fund to 30 trillion yen will allow more government bond buying, the central bank said. It left a credit-lending program unchanged at 35 trillion yen.

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