The Bank of Japan (BoJ) has doubled the maximum outstanding amount for each financial asset purchased through the Program, in a bid to provide financial system stability following the devastating earthquake that hit the country on Friday March 11.
The maximum outstanding amount of financial assets purchased through the Program shall be about JPY 10 trillion. The maximum outstanding amount of loans provided through the Program shall be about JPY 30 trillion.
Japanese government bonds with coupons about JPY 2 trillion, treasury discount bills will be around JPY 3 trillion, JPY 2 trillion for CP, JPY 2 trillion for corporate bonds, JPY 0.9 trillion for beneficiary interest in index-linked exchange-traded funds (ETF) and JPY 0.1 trillion for Investment equity issued by real estate investment corporations.
Earlier today, the BoJ took a number of major steps to further enhance monetary easing, following the massive earthquake that struck Japan on Friday March 11.
At a policy meeting today, BoJ policymakers voted voted unanimously to keep its key interest rate unchanged at the range of 0% to 0.1%, to set the following guideline for money market operations for the intermeeting period. Under this guideline, the central bank said it “will provide ample funds sufficient to meet demand in financial markets and will do its utmost to ensure financial market stability.”
“With a view to pre-empting a deterioration in business sentiment and an increase in risk aversion in financial markets from adversely affecting economic activity, the Policy Board decided to increase the amount of the Asset Purchase Program, mainly of the purchases of risk assets,” said BoJ policymakers in a statement.
The BoJ says that the increase in asset purchases will be made in the following asset categories and that it intends to complete the increased purchases by around the end of June 2012.
“It should be noted that the purchases of ETFs and J-REITs are conditional on obtaining authorization in accordance with the Bank of Japan Act,” says the BoJ in a statement.
On Friday March 11. a massive earthquake that measured 8.9 on the Richter scale hit Japan. The quake hit off the North Eastern coast and caused a 10-metre-high tsunami to hit the coast. Japan authorities reported there is a nuclear power emergency situation with four million homes without power, following the largest earthquake to hit Japan on record. Meteorological agencies are also reporting that there is a 70% chance of aftershocks with magnitude of 7 or higher to hit Japan.
About a fifth of the Japan’s nuclear power generation capacity has been shut down by the disaster, which has led to decision makers to implement rolling blackouts to conserve energy.
Earlier today, the central bank revealed it will inject a total JPY 15 trillion ($183.8 billion) into the country’s financial system.
On market opening the Japanese equity markets plummeted with the Nikkei 225 tumbling by nearly 6% on opening, as a glut of sell orders pushed the index to below 10,000 for the first time since November 18 2010, following the devastating earthquake that struck the country in the early hours of Friday March 11.
Meanwhile, ratings agency Moody’s said the economic impact of Japan disaster is greater than initially expect and it is concerned about Japan’s ability to reduce fiscal deficit in the medium term.
The BoJ says “in order for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability, the BoJ will continue to consistently make contributions as the central bank through the three-pronged approach of pursuing powerful monetary easing consisting of comprehensive monetary easing, ensuring financial market stability, and providing support to strengthen the foundations for economic growth. The Bank will continue to carefully examine the outlook for economic activity and prices, and, if judged necessary, take policy actions in an appropriate manner.”