Search AP News:
Jul 29, 1:17 AM EDT

Japan central bank adds modest stimulus, as economy coasts


AP Photo
AP Photo/Eugene Hoshiko

Latest Business News
Business Highlights

Merck posts strong 2Q numbers, while building for long term

How the Dow Jones industrial average fared on Friday

Exxon Mobil and Stericycle stumble; Alphabet and Newell jump

AP Sources: Tesla looking at cameras, radar in Florida crash

Latest News
Japan central bank adds modest stimulus, as economy coasts

SoftBank profit up 19 pct as Japan sales offset Sprint loss

Nissan quarterly profit down 11 pct on yen, shrinking sales

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
US economy expected to pick up after weak growth in spring

Eurozone likely to get more stimulus as growth halves

Spain revises economic growth forecast up for 2016

Winter took smaller bite from 2015 economy than it appeared

Japan central bank adds modest stimulus, as economy coasts

UK economy grew faster than expected in run-up to EU vote

UN agency: Economy still sliding in Latin America, Caribbean

Nigeria's central bank hikes interest rate to 14 percent

Trade group raises 2016 sales growth forecast to 3.4 percent

South Korea's growth improves on better consumption

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

TOKYO (AP) -- Japan's central bank opted Friday for a modest expansion of its lavish monetary stimulus to help perk up sluggish growth and combat deflation.

The Bank of Japan ended a policy meeting Friday by announcing it will expand purchases of assets from financial institutions to help inject more cash into the world's third-largest economy and pursue its 2 percent inflation target.

But the measures fell short of expectations among many investors for more aggressive action. Ahead of the meeting, speculation had mounted over the possibility for a so-called "helicopter money" approach that would entail more direct infusions of money into the economy.

Recently, the government downgraded its growth forecast for 2016 to 0.9 percent from 1.7 percent.

"With underlying inflation set to moderate further toward the end of the year, we think that the bank will still have to provide more easing before too long," Marcel Thieliant of Capital Economics said in an analysis. "Overall, today's decision was a clear disappointment," he said.

The 7-2 central bank decision was to almost double annual purchases of exchange traded funds, to 6 trillion yen ($57 billion) from the current 3.3 trillion yen. One fifth of that will be earmarked for companies that meet benchmarks for investing in staffing and equipment, it said in a statement.

It also doubled the size of a U.S. dollar lending program to support Japanese companies' operations overseas, to $24 billion.

The BOJ already is injecting about 80 trillion yen ($760 billion) a year into the economy through asset purchases, mainly of Japanese government bonds.

The central bank was under heavy pressure to act after earlier this week Prime Minister Shinzo Abe announced 28 trillion yen ($267 billion) in spending initiatives to help support the sagging economic recovery.

The recent vote by Britain to leave the European Union has added to the uncertainties clouding the global outlook at a time when Japan's recovery remains in question.

"There is considerable uncertainty over the outlook for prices against the background of uncertainties surrounding overseas economies and global financial markets," the central bank said.

The central bank did not change the interest it charges on policy-rate balances it holds for commercial banks, which is now at a record low minus 0.1 percent.

Financial markets seemed underwhelmed by the central bank's modest action.

The Nikkei 225 stock index dropped nearly 2 percent but later regained some lost ground, trading 0.7 percent lower by mid-afternoon Friday. The U.S. dollar weakened to 103.10 yen from 104.80 yen late Thursday.

Ahead of the central bank's decision, Japan reported further signs of weakness in its economy in June, with industrial output and consumer spending falling from the year before.

Core inflation excluding volatile food prices dropped 0.5 percent from 0.4 percent in May, while household spending fell 2.2 percent from a year earlier.

Unemployment fell to 3.1 percent in June from 3.2 percent for the past several months. But tightness in the job market has not spilled into significant increases in wages that might help spur more consumer demand and encourage businesses to investment in the short of "virtuous cycle" Abe has been promising since he took office in late 2012.

Still, while industrial output fell 1.9 percent from the year before, it rose 1.9 percent from the month before, with strong shipments related to homebuilding and other construction.

---

AP Business Writer Elaine Kurtenbach contributed from Bangkok, Thailand.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.