Japanese stock market soars as central bank stimulates growth

Japan’s Nikkei stock market climbed to a seven-year high on Friday after the country’s central bank surprised investors by expanding stimulus to boost economic growth. The Bank of Japan (BoJ) said it would increase its asset purchases by between 10 trillion yen and 20 trillion yen ($91bn to $182bn) to about 80 trillion yen ($725bn) annually. The bank also announced it would triple its purchases of exchange-traded funds and real estate investment trusts, saying the loosening of monetary policy would continue as long as was needed to attain an inflation target of 2%. Its governor, Haruhiko Kuroda, said: “We can say the Japanese economy is now at a critical moment in its process of getting out of deflation.”

The measures this time show the Bank of Japan’s unwavering determination to exit deflation.

Bank of Japan Governor, Haruhiko Kuroda

Deflation has dogged Japan’s economy for two decades. The measures followed the publication of the country’s key economic indicators for September, which showed inflation and household spending both falling with unemployment rising. Japan’s central bank was under pressure to increase stimulus to support growth as Prime Minister Shinzo Abe weighs approval of another sales tax hike next year. He and the central bank have sought to spur inflation as a way of encouraging consumers and businesses to spend more and thus support faster growth. But a sales tax hike in April, from 5% to 8%, slowed a recovery that began in late 2012. He is due to decide before the end of the year whether to raise the tax to 10% in 2105.

nikkei Business