The Bank of Japan decided at its policy meeting Thursday to carry out new quantitative and qualitative monetary easing measures, including the doubling of the amount of money in circulation in two years.
Through the central bank's aggressive purchases of various types of assets, including longer-term maturity government bonds, the bank hopes to realise the ambitious 2 per cent inflation target it adopted in January.
It will be the first quantitative monetary easing measure to be taken by the central bank since March 2006.
Specifically, the central bank will purchase longer-term government bonds, including those with a maturity of 40 years, from financial institutions, while increasing its purchases of financial products with price fluctuation risks, such as exchange-traded funds (ETFs) and Japanese real estate investment trusts (J-REITs), by about 1 trillion yen (S$12.7 billion) a year.
The two-day policy meeting that ended Thursday was the first since the bank's new governor, Haruhiko Kuroda, assumed the post. Akira Amari, the minister for economic and fiscal policy, represented the government in the meeting.
At a press conference following the meeting, Kuroda explained the reasoning behind the central bank's decisions.
To promote the quantitative easing measure, the bank will aim to shift the focus of its monetary easing policy from interest rates to the money supply, which is the amount of money in the economy, consisting of cash in circulation and commercial banks' reserves with the central bank.