The Bank of Japan unexpectedly expanded its asset-purchase fund by 10 trillion yen ($126 billion), seeking to counter an increasing danger of contraction in the world’s third-largest economy.
The BOJ’s program, in which it buys mainly government debt, or JGBs, was enlarged to 55 trillion yen, the bank said in a statement in Tokyo. Governor Masaaki Shirakawa said the bank also will abandon minimum yields for 1.8 trillion yen in monthly government-bond purchases conducted separately from the stimulus fund, opening the door to the potential for negative rates.
Nuclear plant shutdowns, weakness in exports, tensions with China and the risk the government will run out of money because of a parliamentary deadlock over financing are challenges for an economy that contracted last year after an earthquake and tsunami. Prime Minister Yoshihiko Noda said last week that an extra budget will be needed.