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Bank of Japan to take an easing policy response to economic weakness

2013.01.27, Ping-Ying Chen

For most of the past two decades, Japanese prices have been on a steady downward trend. Under the strong pressure of Japanese Government, the Bank of Japan agrees to further loosen monetary policy to push the economy out of the long-term deflationary situation. In addition to a significant expansion of asset purchases, the Bank of Japan has accepted Prime Minister Shinzo Abe's call for a 2 per cent inflation target to bolster monetary policy, with both the central bank and the government mandating Japan's growth prospects for optimism. But the conservative Bank of Japan has warned that the effectiveness of monetary policy to penetrate the overall economy will take a long time.
While Japan's politicians urged the Bank of Japan to take further action, the massive monetary easing policy has also been criticized by other central bankers who fear the move will have negative effects.
Germany's central bank governor Jens Weidmann warned Japan not to politicize interest rates with excessive monetary easing, reflecting Europe's growing fears that other central banks could devalue their currencies as a way to spur economic growth.