BOJ expands fund by 5 trillion yen for monetary easing measures

The Bank of Japan's Policy Board on April 27 decided on measures to stimulate the nation's lagging economy that will inject 5 trillion yen ($61.6 billion) into the funds available in the market for financial institutions.

The pump-priming measures are designed to help the economy reach the inflation target of 1 percent set by the BOJ in February.

Ever since the inflation target was established, the BOJ has faced increasing pressure from the government as well as the ruling and opposition parties for further monetary easing measures.

The additional measures are the first since the inflation target was set.

The volume of the fund to purchase government bonds and other assets from financial institutions and flood the market will be raised from the current 65 trillion yen to 70 trillion yen.

While the BOJ will increase by about 10 trillion yen the amount to be used to purchase long-term government bonds, it will also reduce the volume of funds used to make low-interest loans to financial institutions by about 5 trillion yen. That would leave the 5 trillion yen as the net increase in the fund.

The central bank will also expand the range of government bonds it purchases. Until now, only bonds with maturities of two years or less were purchased, but from now bonds with maturity periods of three years or less will also be acquired.

That move is expected to push down interest rates for loans that have longer repayment periods and make more funds available for longer term investments, such as urban development projects and development of natural resources.

The BOJ initially planned to purchase the government bonds from financial institutions by the end of this year, but the deadline will be extended until the end of June 2013.

The BOJ also will increase the amount of funds set aside to buy financial assets. An additional 200 billion yen will go for the purchase of exchange-traded funds while an additional 10 billion yen will go to purchases of real estate investment trusts.

The central bank will also continue with its virtual zero interest rate policy by keeping its benchmark interest rate at between 0 and 0.1 percent.