April 27 - The Bank of Japan bows to political pressure, expands asset buying fund by more-than-expected $124 billion to pull economy out of deflation. Rough Cut (no reporter narration).
ROUGH CUT - NO REPORTER NARRATION The Bank of Japan (BOJ) eased policy further on Friday, boosting its asset purchases by a more-than-expected 10 trillion yen ($124 billion) to 40 trillion yen, and said it would buy longer-term government bonds to pull the economy out of deflation. The central bank also surprised some market watchers by saying it would buy more riskier assets: exchange traded funds (ETF) and real-estate linked funds (REITs). But the BOJ sought to cool expectations of further aggressive easing, saying it would not take "too long" for consumer price inflation to reach the central bank's 1 percent target, and it was increasingly evident the world's third-largest economy was shifting towards recovery. The BOJ's second easing in just over two months is widely seen as a response to political pressure for greater efforts to end deflation that has dogged Japan for over a decade, depressing consumption and business investment. Borrowing costs are already low, with two-year bond yields trading at BOJ's overnight rate target ceiling of 0.1 percent, so pumping in more money is seen as a largely symbolic move which will do little to directly spur the economy. Analysts say because of the impact on the yen and the currency's importance for Japan's export machine, the BOJ found itself locked in a policy easing competition with the U.S. Federal Reserve and, to a lesser extent, the European Central Bank. The Fed stood pat on policy earlier this week, but Chairman Ben Bernanke said the central bank would not hesitate to launch another round of government bond buying if the U.S. economy were to weaken. In such a scenario, the yen could rise again, threatening the economic recovery and putting the BOJ under pressure to act, too.