RSSJapanese Central Bank Preparing to Create Heavy Liquidity
Apr 26
In order to deal with post-earthquake related problems in the country, the Bank of Japan (BOJ) may increase the amount of cash in the calamity-hit country’s banking system. However it will leave untouched its asset-purchase policy, so that long run damage to the Asian powerhouse’s economy could be estimated.
While speaking to the media yesterday, Governor Masaaki Shirakawa announced that they are all set to infuse heavy liquidity in Japan, in order to ensure that the country is able to recover quickly in this time of crisis. According to some economists, the bank would keep the long term credit scenarios intact at the $428 billion mark. Primary interest rate of Bank of Japan has already been cut down to almost zero percent, in a move which was taken to drive deflationary pressures out of the country.
Morgan Stanley MUFG Securities Co’s chief Japan economist Takehiro Sato foretold that there would be no change in the monetary policy, but that the Bank of Japan will inject enough cash flow into the system. Sato also believes temporary lending institutions could be created in the northern area of Tohoku, to help ease earthquake-provoked financial
It is still quite difficult to get an accurate estimate of the loss sustained in Japan by the recent earthquake, since much depends on the time it will take to just get Japan’s industries back up and running at full speed. According to analysts, the central bank is looking to supply liquidity into the banking system so that its financial institutions could settle the immediate withdrawal requests of customers who bank with them.
According to Masaaki Kanno, JPMorgan Chase & Co’s chief Japan economist, Shirakawa and company could choose to speed up the asset purchasing procedure, which includes state-issued bonds and exchange-traded funds, without creating an emergency program, especially in such case the stock markets fall and the local currency appreciates.
Yen climbed up 0.5% to 81.45/$, which means that since the March 11 quake, it has ascended to nearly 2%, and there’s a good chance that the Japanese investors would send their assets back home.
Mansoor Mohi-uddin, UBS AG’s head of global currency strategy in Singapore stated that the Japanese government may command the Bank of Japan to dump the local currency in bulk, if its value starts to inflate.
Within 14 minutes of the first quake, the Nikkei 225 Stock Average had gone down by 1.7%.
Prime Minister Naoto Kan is currently developing a fiscal program to assist with the potential economic and financial crisis. According to Fiscal Policy Minister Kaoru Yosano, discretionary funds of 1.3 trillion yen are still left in this year’s budget, which could be used to assist with the current situation.
Yosano said that the March 11 quake was greater in intensity and the area is affected than the 1995′s Kobe earthquake, therefore, the economic shock will also likely be greater than the 20 trillion yen loss that was suffered back then.
So far the Bank of Japan has advanced 55 billion yen to Japanese financial institutions who’ve meet the requirements for assisting the Japanese people.
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