World stock markets have extended their gains since the start of 2013 following the Bank of Japan’s (BoJ) announcement that it will pump more stimuli into Japan’s economy to ward of deflation and generate growth, including a doubling of the country’s target inflation rate from 1% to 2%. The announcement follows the government’s decision earlier this month to launch a ¥10.3 trillion
economic stimulus package
The BoJ said that it would aim to achieve a 2% inflation rate “at the earliest possible time” by adopting stimulus policies similar to those employed by the US Federal Reserve. This will include an open-ended commitment, beginning in January 2014 when its current round of asset purchases is due to expire, to buying ¥13 trillion of mostly short-term government debt each month until the target is met.
Masaaki Shirakawa, the BoJ governor, said that the new measures represented “a resolute advance” and the central bank had “strengthened co-operation with the government”.
Japan’s inflation rate has rarely been as high as 2% in the past 15 years, which have been marked more by persistent mild deflation. Incoming prime minister Shinzo Abe, whose Liberal Democratic Party returned to power last month after three years of opposition, pledged to end price declines to give companies and consumers a greater incentive to borrow and pull the world’s third-largest economy form recession.
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