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BoJ follows Fed and ECB with new pledge

By Ben McLannahan in Tokyo and Claire Jones and Alice Ross in London High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights. The Bank of Japan has bowed to political pressure and followed the lead of the US Federal Reserve and the European Central Bank as it pledged to buy a potentially unlimited amount of government bonds. But the fresh bid to defeat the spectre of deflation by the BoJ failed to weaken the yen, which staged a rebound in global markets as investors expressed their disappointment at the timing of the measures. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email to buy additional rights. The Japanese central bank said it would aim to achieve a rate of 2 per cent inflation – up from its current goal of 1 per cent – “at the earliest possible time” by shifting to the kind of limitless stimulus embraced by the US Federal Reserve and the ECB. From January next year, when its current Y101tn round of asset purchases had been set to expire, the bank will begin buying Y13tn ($146bn) of mostly short-term government debt each month until that inflation target is met. The BoJ also produced a statement vowing to strengthen the co-operation between the bank and the government to

overcome deflation and achieve “sustainable economic growth”. the president of Germany’s Bundesbank warned that the erosion of central bank independence around the world threatened to spark competitive devaluations of exchange rates.35 per cent.5 per cent. said: “There is disappointment on three fronts: the inflation target has no fixed time limit. Jens Weidmann cited Japan as one example of “alarming infringements” by the government towards monetary policy. Since Shinzo Abe became leader of the Liberal Democratic . Kit Juckes. the ECB has promised to buy eurozone sovereign debt in potentially unlimited amounts in exchange for commitments from governments to go ahead with structural reforms to their economies in a policy known as outright monetary transactions or OMT. The Nikkei 225 stock average closed down 0. The US central bank also said in December it would keep interest rates close to zero until the US unemployment rate falls below 6. the first time a major central bank has ever tied its interest rate policy directly to the state of the economy. from 7. the bond purchases are still skewed to the short end of the curve. But the role of the government in the measures taken in Japan has drawn criticism. Currency investors had piled into short yen trades in recent weeks on expectations the BoJ would take firm action to combat deflation and weaken the yen. On Monday.” The move follows similar measures by the Fed and ECB in what has become a global race to boost sluggish economies through monetary stimulus and currency devaluation. Meanwhile. The Fed last year beefed up its third round of quantitative easing by saying that it would keep buying $45bn of Treasuries in addition to $40bn of mortgage-backed securities each month until there is a substantial improvement in the labour market. and they don’t start soon enough.7 per cent today.35 while the euro fell nearly 1 per cent to Y117. The US dollar fell more than 1 per cent to Y88. a currency strategist at Société Générale.

The Japanese government on Tuesday praised the BoJ last September. which was taken to mean a positive range of 2 per cent or lower in year-on-year change in the consumer price index. Ending price declines would give companies and households more incentive to borrow and help the world’s third-largest economy pull out of its latest recession. Since the LDP’s election victory last month. vaguely worded “goal” for price stability over the medium to long term. . Masaaki Shirakawa. along with a big fiscal stimulus package and specific policies – as yet unannounced – to spur private-sector investment. he has repeatedly called for the BoJ to use more of the tools at its disposal to engineer a rise in prices. the BoJ governor. Mr Abe said the central bank’s “responsibility” for ending deflation had been made clear and added that the move was “a step toward bold monetary easing”. described the measures as “a resolute advance” and said the central bank had “strengthened co-operation with the government”. The inflation target replaces the BoJ’s current. its third in the past five years. he has made clear that looser policy from the BoJ is one of the three “arrows” of his economic policy.