Japan Eases Monetary Policy in Surprise Move

TOKYO—The Bank of Japan announced an aggressive expansion of its monetary-easing program, acting with surprising speed after its analysis suggested that any economic recovery is at least six months away amid a global slowdown. The move on Wednesday follows similar actions by other major central banks. The Federal Reserve last week announced another round of quantitative easing, and earlier this month the European Central Bank established an open-ended program sovereign debt buying program in an attempt to end the euro crisis.  The Bank of Japan has joined two other central banks in easing monetary policy. The BOJ policy board on Wednesday increased the size of its asset-purchase program to ¥80 trillion ($1. 01 trillion) from ¥70 trillion, and extended its deadline by six months to the end of 2013. The main tool for pumping money into the economy—and stimulating demand—is buying government bonds and other securities. The BOJ is also removing the floor on the yields it would accept for bonds it purchases. It always been able to find enough sellers in the market because the maximum price it could pay was effectively capped by the 0. 1% bidding floor—when market rates had gone below that level. The BOJ has already removed the floor on short-term treasury discount bills, which has boosted interest among sellers. the central bank said in a statement released with the rate decision. Japanese government bond prices initially moved higher but ended largely unchanged. The decision to do more was backed up by its bleaker view of the economy. the pick-up in economic activity has come to a pause." Under the new program, the central bank will purchase an additional ¥5 trillion of Japanese government bonds by the end of December 2013 and an additional ¥5 trillion of short-term government bills by the end of June 2013.

Article on the Wall Street Journal, http://online.wsj.com/article/SB10000872396390443816804578005260696436022.html