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BOJ to pump an additional US$130 bil. into economy

TOKYO -- The Bank of Japan (BOJ) said Tuesday that it will pump US$130 billion more into its ailing economy, the latest push to combat stubborn deflation as domestic and global uncertainty intensifies.

However, analysts warned that was unlikely to be enough to kick start the sluggish economy, a day after data showed it had slowed much faster than expected in the final three months of 2011.

The central bank said it would increase its asset purchase program by 10 trillion yen (US$130 billion) to about 65 trillion yen, in a surprise move that softened the yen and boosted the stock market.

“When central banks in Europe and the United States are taking more easing policies, the Bank of Japan appeared to be left behind,” said Tsuyoshi Ueno, senior economist at NLI Research Institute.

“It was nonetheless a surprising move, which makes us wonder 'why now?'” he said, suggesting the bank may have come under political pressure to fight deflation, which has stalked the Japanese economy for more than a decade.

“The (gross domestic product) figures were weaker than expected, and politicians are now discussing raising the sales tax,” he said. “Tackling deflation is a dire necessity.”

Later, BOJ Governor Masaaki Shirakawa denied the decision was the result of political pressure, telling reporters: “If the independence of a central bank is not respected, it will eventually have a negative effect through rises in long-term interest rates.”

The BOJ move will see the bank buy financial assets such as government bonds and commercial paper from private financial institutions, effectively providing more money to banks who can then lend to cash-strapped firms.

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 Inflation rate for Britain drops 0.6% to sit on 3.6% in January: official data 
Bank of Japan Governor Masaaki Shirakawa answers a question during his press conference at the bank's headquarters in Tokyo on Tuesday, Feb. 14. The Bank of Japan said that it will pump US$130 billion more into the ailing economy, in its latest push to combat stubborn deflation as domestic and global uncertainty intensifies. (AFP)

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