Chemistry Board

The Bank of Japan will aim to double the monetary base over two years through the aggressive purchase of long-term bonds, in a dramatic shift aimed at ridding Japan of the deflation that has dogged the country for almost two decades.

Haruhiko Kuroda on Thursday announced his arrival as central bank governor with a “new phase of monetary easing”, a move that comes after Prime Minister Shinzo Abe told the bank to target a 2 per cent rate of inflation.

“We can’t escape deflation with the incremental approach that’s been taken until now,” Mr Kuroda said after the announcement. “We need to use every means available.”

While he did not rule out a further acceleration of the bank’s easing programme should prices fail to rise as desired, Mr Kuroda said the new measures would be sufficient to achieve his goal.

“I am confident that all the policies we need to achieve 2 per cent inflation in around two years are now in place,” he said.

The Nikkei 225 stock average closed up 2.2 per cent, snatching back losses earlier in the day. The benchmark 10-year bond yield fell almost a fifth to 0.446 per cent, matching the all-time low of June 2003. The yen tumbled from 92.91 to the US dollar to a two-week low of about 95.20.

The BoJ said it would boost Japan’s monetary base from Y135tn ($1.43tn) to Y270tn by March 2015, mainly by buying more long-term government bonds. That will raise the average remaining maturity of its holdings from about three years to seven years, keeping downward pressure on yields all along the curve.

Read full article