The Bank of Japan may today inject more short-term cash into the banking system after the nation’s most powerful earthquake on record, while keeping its asset- purchase plans unchanged as officials gauge the longer-term effect on the world’s third-largest economy.
Governor Masaaki Shirakawa told reporters late yesterday he’s ready to unleash “massive” liquidity starting this morning in Tokyo, as the BOJ seeks to assure financial stability. Economists said officials will likely decide to keep longer-term credit programs at a total of 35 trillion yen ($428 billion). The bank’s main interest rate has already been cut to near zero as policy makers last year sought to end the nation’s deflation.
“Monetary policy will be unchanged, but they will probably pledge to provide ample liquidity,” said Takehiro Sato, chief Japan economist at Morgan Stanley MUFG Securities Co. in Tokyo. Policy makers may also “establish an emergency lending facility to help financial institutions in Tohoku,” the northern region most damaged by the catastrophe, he said.
The economic hit from the March 11 quake will depend on how long it shuts down factories and the distribution of goods and services, with the potential meltdown at a nuclear power facility clouding the outlook. For now, the central bank is likely to ensure lenders have enough cash to settle transactions, and aim any additional steps at providing credit in the areas of northeastern Japan devastated by the temblor, analysts said.
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