The Bank of Japan (BOJ) on Thursday opted to ease its monetary policy and expand the size of its asset buying program to help support the nation's economy, which is struggling under the persistent strength of the yen.
The BOJ said at the conclusion of its one-day policy meeting that the size of its asset-buying program would be increased from 50 trillion yen to 55 trillion yen (723 billion U.S. dollars), with the extra funds being used to buy the Japanese government bonds.
The decision was made by the BOJ following a majority vote of 8- 1 by its policy board members.
The latest easing move by the central bank is aimed at offsetting some of the downward pressure being exerted on Japan's key export sector by the yen's recent advance to record highs versus the U.S. dollar, as well as pressure from uncertainties in the eurozone, which has forced the yen higher against the euro.
"The bank deemed it necessary to further enhance monetary easing so as to ensure a successful transition to a sustainable growth path with price stability," the BOJ said in a statement.
"Some more time will be needed to confirm that price stability is in sight and due attention is needed for the risk that the economic and price outlook will further deteriorate depending on developments in global financial markets and overseas economies," the central bank's statement said.
Following the yen's advance to a new postwar high of 75.73 yen versus the U.S. dollar in New York on Tuesday, Japan's Finance Minister Jun Azumi slammed short-term investors, claiming the moves were "speculative" and "one-sided" and that investors were making large bets to achieve quick profits.
He told reporters at a news conference in Tokyo that he believed the central bank will make a "timely and appropriate response."
The bank's asset buying program currently includes purchases of corporate debt and exchange-traded funds (ETF's) as well as government bonds and was introduced originally in October, 2010.
On Aug. 4 the program was increased by 10 trillion yen, but the latest increase will see the size of Japanese government bonds purchases raised by 5 trillion yen to 9 trillion yen, with the total size of the asset purchases now amounting to 20 trillion yen. The bank said on Thursday that fixed-rate funds would be held steady at 35 trillion yen however.
The BOJ on Thursday also decided in a unanimous vote to hold its key short-term interest rate at between zero to 0.1 percent, as a means to counteract the yen's rise by making it less appealing for speculators to bet on Japan's currency.
Both the finance ministry and the BOJ are closely watching developments in Europe and the U.S. as yen sales are being made against the euro and the dollar, as the Japanese currency is deemed safe-haven, against a backdrop of sovereign debt in Europe and the likelihood of further monetary easing in the U.S. by the Federal Reserve.
Despite the BOJ in July saying it expected Japan's economy to expand 0.4 percent in real gross domestic product terms in the year through next March, and by 2.9 percent in fiscal 2012, it cut its growth forecast for the nation's economy on Thursday.
The central bank lowered its forecast to 0.3 percent for fiscal 2011 and 2.2 percent for fiscal 2012 and said it now expects a 1.5 percent increase in real GDP expansion for fiscal 2013.
On the prices front the BOJ said that core consumer prices will remain flat in fiscal 2011 and increase 0.1 percent in the next fiscal year. This rise is expected to be followed by a 0.5 percent increase in fiscal 2013, the BOJ said.
