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Japan Expands Stimulus to Spur Recovery10/31 06:12

   Japan's central bank expanded its asset purchases in a surprise move Friday 
to shore up sagging growth in the world's No. 3 economy.

   TOKYO (AP) -- Japan's central bank expanded its asset purchases in a 
surprise move Friday to shore up sagging growth in the world's No. 3 economy.

   The Bank of Japan said it would increase its asset purchases by between 10 
trillion yen and 20 trillion yen ($91 billion to $181 billion) to about 80 
trillion yen ($725 billion) annually.

   BOJ Gov. Haruhiko Kuroda said the increase was required to prevent a 
reversal into a "deflationary mindset" that the country's leaders contend has 
stymied growth for many years. Countering such a trend is "the most important 
thing we can do," Kuroda said. "Whatever we can do, we will."

   The Nikkei 225 stock index jumped 4.8 percent to close at a seven-year high 
of 16,413.76 and the dollar rose 2 percent against the yen after the unexpected 

   Data released Friday, as the BOJ was holding a routine policy meeting, 
showed Japan's economic recovery remained in the doldrums in September as 
household spending fell, inflation edged lower and unemployment ticked up.

   The central bank's announcement highlights divergent fortunes among major 

   The U.S. Federal Reserve earlier this week announced it was ending its own 
extraordinary program of asset purchases, known as quantitative easing, which 
it instituted after the global recession to help the U.S. economy recover.

   As that $4 trillion program wound down, Japan's central bank has come under 
pressure to increase stimulus to support growth as Prime Minister Shinzo Abe 
weighs approval of another sales tax hike next year.

   The central bank's decision may encourage Abe to push ahead with the 
politically difficult choice. Surveys show more than 70 percent of the public 
are opposed to raising the tax, which is needed to help tame Japan's swollen 
government debt.

   A sales tax hike in April, from 5 percent to 8 percent, slowed the recovery 
that began in late 2012. Abe is due to decide before the end of this year 
whether to raise the sales tax by another 2 percentage points to 10 percent. He 
also is expected to introduce supplementary spending to cushion the impact of 
the tax hikes.

   The central bank said the monetary loosening would continue as long as 
needed to attain an inflation target of 2 percent.

   In addition to stepping up asset purchases, it also will triple its 
purchases of exchange-traded funds and real estate investment trusts, and 
increase the average maturity of the assets it holds to 10 years from seven 

   The bank's main decisions on expanding the scope of monetary easing passed 
by a 5-4 majority, indicating differences of opinion among members of the 
bank's policy board.

   The central bank's announcement caught most analysts by surprise.

   "We had expected the bank to announce additional stimulus only in 2015," 
Marcel Thieliant, an economist with Capital Economics, said in a commentary.

   Abe and the central bank have sought to spur inflation as a way of 
encouraging consumers and businesses to spend more and thus support faster 

   After an initial burst of surging stock prices last year, most people say 
they haven't benefited directly from that "Abenomics" strategy. Despite some 
wage increases, incomes have fallen overall as prices have risen. And Abe has 
made scant progress on reforms intended to open new opportunities and improve 

   Core inflation, excluding volatile food prices, was at 3.0 percent in 
September, down from 3.1 percent in August. When the increased costs from the 
tax hike are figured in, inflation remains below the target rate of 2 percent

   Unemployment rose to 3.6 percent from 3.5 percent.

   The government reported that household spending fell 5.6 percent from a year 
earlier in September, though it rose 1.5 percent from August. Household 
incomes, meanwhile, fell by 6 percent from a year earlier in real terms.

   Kuroda cited high uncertainty over wage and spending trends as a factor 
clouding the economic outlook.


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