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In a surprise move, the Bank of Japan (BOJ) has decided to add 10 trillion yen ($130 billion) to its asset buying and lending scheme. The central bank has said that it will increase its asset purchase programme from 55 trillion yen to 65 trillion yen, and the entire increase will be earmarked for the purchase of long-term Japanese government bonds.

 

“The Bank will pursue powerful monetary easing by conducting its virtually zero interest rate policy and by implementing the Asset Purchase Program mainly through the purchase of financial assets,” the central bank said.

 

The BOJ decided by a unanimous vote to keep the key interest rate unchanged at a range of zero to 0.1 percent.

The Bank of Japan on Tuesday defined 1 percent consumer inflation as a near-term goal, amid growing calls for more action to help the economy stuck in deflation. The central bank has defined desirable long-term price growth as consumer inflation of 2 percent or lower with the median for the nine-member board at 1 percent, and vowed to keep ultra-low interest rates until an end to deflation is in sight.

“Japan’s economy currently confronts the long-term and structural challenge of a declining trend in growth rates amid rapid population ageing. Tackling such a challenge is indispensable in order to establish a new basis for economic growth,” the central bank said in its policy statement.

In the past few weeks, the BOJ has come under increased pressure from politicians, who said the central bank was not aggressive enough in its efforts. Lawmakers are threatening to bring changes to the BOJ law that would give the government more scope to intervene in monetary policy.

According to Seiji Adachi, senior economist at Deutsche Securities inTokyo, pressure has been mounting on the BOJ to take bolder action and set a Federal Reserve-style explicit inflation target “The Federal Reserve’s decision to adopt an inflation target is clearly affecting the BOJ’s thinking. The Fed’s move has also given ruling and opposition lawmakers reason to pressure the BOJ into adopting an inflation target and easing policy further,” he said.

 

The announcement was greeted positively by the markets, with the benchmark Nikkei up 0.65 percent, at about 0430 GMT

 

The yen dipped as much as 0.4 percent and was trading at 77.90 per dollar. The yen has been trading near record highs, which has severely affectedJapan’s export-led economy.