Japan bank takes stimulus step
TOKYO — Japan’s central bank expanded a government bond-buying program last week, acting to spur growth after news of a further decline in industrial production.
The Bank of Japan’s policy board voted unanimously to increase the asset-purchasing program by $139 billion to $1.15 trillion.
The central bank decided against any change in its key interest rate, which remains at 0 percent to 0.1 percent.
The bond-buying program is intended to encourage borrowing and spending and help make Japan’s exports more competitive.
A fresh barrage of negative data on Japan’s failing recovery pumped up pressure for the central bank to act to help revive the world’s third-largest economy.
Japan’s industrial output contracted by 4.1 percent in September from August and 8.1 percent from a year earlier as automakers and steel mills cut production because of shrinking demand and antagonisms with China, according to the Ministry of Economy, Trade and Industry.
Jobless figures for September likewise offered little encouragement, as the government reported the seasonally adjusted unemployment rate was 4.2 percent in September, unchanged from August.
The economic recovery that followed Japan’s March 2011 disasters has been doused by slowing global growth. Flaring tensions with China over disputed islands in the East China Sea have further crimped demand, especially for big-ticket items like cars. Slowing growth in China, meanwhile, has hit demand for industrial inputs like steel and machinery.
“Industrial production is on a downward trend,” the ministry said, forecasting a further decline in October, followed by a rebound in November.
Embattled Prime Minister Yoshihiko Noda convened an extraordinary session of the legislature last week, appealing to the opposition Liberal Democratic Party to cooperate in passing a bill authorizing bond sales to finance the growing deficit.
Japan’s Cabinet approved a $5.3 billion emergency stimulus package on Oct. 26, double the size originally expected. The government was obliged to dip into reserves to pay for the new stimulus, since its leeway to boost spending is limited by a legislative standoff preventing issuance of some $480 billion in deficit financing.
As it confronts that “fiscal cliff,” which could raise the country’s borrowing costs, Japan already leads industrial nations with government debt amounting to more than twice the country’s gross domestic product.
“We still have work to do!” Noda said last week in a speech that repeatedly reminded lawmakers of their responsibility toward future generations. He warned that funding shortfalls threaten to affect crucial government services.