Japan Announces More Stimulus

Japan announced 2 measures to improve its economy this morning, reports the UPI. The Bank of Japan announced that it would make more money available to banks under a low, fixed rate - about a third more than is currently in circulation, jumping a lending facility to $351 billion. A second special lending program would be added also. In addition, the bank said it would keep its overnight bank-to-bank lending rate at 0.1 percent.

Additionally, Japan said it would shore up the yen. However, veteran Japan watchers say that ‘shoring up the yen’, of course, means diluting the yen, which has risen to 15-year highs in recent months, cutting into margins for exporters. Unlike China, Japan can’t rely on the domestic market to create much of a stimulus. In Japan, people already have cars, radios, flat screen televisions and microwave ovens. The domestic market cannot act like a pressure valve, absorbing business when international markets are soft. Hence, Japan is trying to lower the value of the yen to stimulate exports.

What are the analysts saying? One analyst said it wasn't enough:

"In our view, this will not be the last easing. If the economic outlook and market conditions get worse, the Bank of Japan will likely announce some additional easing measures," Masaaki Kanno an economist at JPMorgan Securities Japan, said in an advisory note Monday.

The yen is trading lower today. From a recent high of 83.60 against the U.S. dollar, the yen, meanwhile, traded at 84.81 per dollar, compared to 85.36 on Friday.

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