BoJ injects record $182 billion into Japan economy

March 14, 2011
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, TOKYO, Mar 14 – Japan\’s central bank pumped a record 15 trillion yen ($182 billion) into the financial system Monday and doubled its asset purchase scheme to buffer the economy from Japan\’s strongest ever quake.

The fund provision is the largest ever in a single operation by the Bank of Japan as it looks to support the world\’s third-largest economy battered by the impact of a monster 8.9 magnitude earthquake that struck Friday.

"We will take every possible measure, including providing liquidity, to ensure the stability of financial markets and smooth settlements (of business deals)," a bank spokesman said.

It will provide an additional 3 trillion yen on Wednesday.

The priority of the central bank is to ensure that financial institutions in disaster-hit regions do not run out of funds. Over the weekend it provided them with 55 billion yen to ease the pressure.

Monday\’s move was the first time since May, when European sovereign-debt fears pushed up the yen steeply and weighed on Tokyo shares, that the central bank injected same-day funds to boost confidence.

The BoJ also cut its scheduled policy meeting from two days to one after Japan\’s worst quake on record and a lethal 10-metre tsunami ravaged the northeast of the country.

The BoJ left its key rate unchanged between zero and 0.1 percent.

The central bank said it would double a five trillion yen asset-buying programme unveiled in October "with a view to pre-empting a deterioration in business sentiment and an increase in risk aversion" following the twin disasters.

Combined with other funding measures in place, the programme has now swelled to around 40 trillion yen in total.

In a statement, the bank said it had been trying to gauge the effects of the devastating earthquake on markets and the operations of banks across the country.

"The damage of the earthquake has been geographically widespread, and thus, for the time being, production is likely to decline," it said.

The yen briefly touched a four-month high before easing against the dollar on the massive liquidity injection Monday as markets responded to the natural disaster.

It briefly surged to 80.60 against the dollar, the highest since November 9, before retreating to 82.19, and held steady despite a fresh explosion at the stricken Fukushima nuclear plant Monday as engineers battle meltdown risks.

The government expects a "considerable" economic impact from the huge earthquake and devastating tsunami that plunged the nation into what Prime Minister Naoto Kan has called its worst crisis since the Second World War.

It faces a huge challenge in financing the mammoth rebuilding task that will be required in the aftermath of a disaster whose economic impact is widely expected to be at least as bad as that from the 1995 Kobe earthquake.

Japan\’s public debt is the industrialised world\’s biggest at around 200 percent of GDP, and the nation\’s credit rating was recently downgraded on concerns that not enough is being done to address it.

The disaster is seen to place yet more pressure on the debt-pile.

Stocks saw a post-quake sell-off with carmakers, banks and electronics firms taking a hit on fears for the economy as power shortages prompted rolling blackouts and plants remained closed in quake-hit areas, hitting production.

Engineers are battling against the risk of meltdown at the stricken nuclear power station, while the death toll from the quake and the resulting wall of water that tore into parts of the northeastern seaboard is expected to surpass 10,000.

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