Japan's central bank joins US Fed in easing policy

TOKYO (AP) — Japan’s central bank expanded its monetary easing by ¥10 trillion ($126 billion) Wednesday, moving to nurture the country’s feeble economic recovery and cushion its exporters from the yen’s rise against other currencies.

The Bank of Japan wrapped up a two-day policy meeting by increasing its asset-purchasing fund to ¥55 trillion ($695 billion) from ¥45 trillion. That followed the US Federal Reserve’s decision last week to stimulate growth through so-called quantitative easing.

“Regarding risks, there remains a high degree of uncertainty about the global economy,” the bank said in a statement. “The pick-up in economic activity has come to a pause,” it said, forecasting that activity will remain flat.

In what it said was the “pursuit of powerful monetary easing,” the bank also eliminated the 0.1 percent floor for interest rates on Japanese government bonds it purchases, a move that will help to stabilize the yen, said Masayuki Kichikawa, an economist at Bank of America-Merrill Lynch.

He characterized the BOJ’s move as a “pleasant surprise” since the central bank had not been expected to ease policy until late October.

Recent weak economic data and strong pressure from politicians anxious to not to see a further deterioration ahead of elections, expected soon, may have played a role.

The US Federal Reserve, similarly alarmed by chronic weakness in the US economy, launched an aggressive new effort Thursday to boost the stock market and make borrowing cheaper for years to come.

The Fed said it would buy mortgage bonds for as long as it deems necessary and keep interest rates at record lows until mid-2015 — six months longer than previously planned.