Bank of Japan doubles lending plan to $222 bn

TOKYO: The Bank of Japan doubled a lending programme aimed at stoking credit growth after the government stepped up calls to arrest deflation that’s hampering the economic recovery. Governor Masaaki Shirakawa and his board increased the three-month loan facility to 20 trillion yen ($222 billion), the bank said in a statement after its meeting in Tokyo.

They also held the overnight lending rate at 0.1%. Shirakawa said there is no “miracle” cure to stem declines in prices that are deepening even as the economy sustains a revival from its worst postwar recession. Prime Minister Yukio Hatoyama’s administration, restrained from adding to fiscal stimulus by a record debt load, has been pushing the bank to do more to bolster growth.

The move “could implant a strong impression among the government that the stronger it presses, the more it can get from the BOJ”, said Mitsuru Saito, chief economist at Tokai Tokyo Securities Co. The expansion “is highly unlikely to shore up the macro-economy, while having only a limited impact on liquidity”, he said. Board members Miyako Suda and Tadao Noda opposed the credit enlargement.

The size of the increase matched the forecasts made by six of 17 economists surveyed by Bloomberg. The rate decision was unanimous and expected by all 17 analysts. BoJ is adding liquidity just as counterparts around the world are withdrawing it as their economies recover from the global recession. The US Federal Reserve on Tuesday affirmed it will let a record mortgage-security purchase program conclude at the end of March.