The Japanese central bank's decision on further monetary easing steps Tuesday came as a surprise to market on Valentine's Day, with many wondering how long the " present" can stay "fresh" for shoring up the economy.
The Bank of Japan announced Tuesday to take further monetary easing steps by setting its price stability goal at one percent to fight deflation. It also decided to expand its asset purchase program by 10 trillion yen (about 128 billion U.S. dollars) to 65 trillion yen. The new injection is earmarked for long-term government bonds.
The BOJ also decided to hold its key interest rate unchanged at zero to 0.1 percent after a two-day policy meeting through Tuesday.
The Japanese central bank means to seek "powerful monetary easing" until its annual consumer price inflation of 1 percent is achievable.
The BOJ Governor Masaaki Shirakawa said Tuesday the move was made to underscore its commitment to fighting chronic deflation in the country.
But analysts doubted the effectiveness of the move, believing the market has been accustomed to such moves.
Similar steps were taken in late October when the central bank announced that it would expand its asset buying fund by 5.0 trillion yen to 55 trillion yen.
The steps were believe to boost the economy's fragile recovery when the country was confronted with a strong yen and a slowing global economy.
The results of the injection was not so optimistic. Japan's economy contracted an annualized real 2.3 percent in the three months starting in October, marking the first fall in two quarters, according to a government report on Monday.
The figure for gross domestic product (GDP) was equivalent to a shrinkage of 0.6 percent from the previous quarter, according to a preliminary report of the Cabinet Office.
The fall was worse than the earlier forecasts by domestic think tanks.
Tuesday's decision which came just one day after the government report raised doubt among investors and economists.
But Shirakawa told media that the government had not pressured the central bank to make such a decision.
Following the steps on Tuesday, the U.S. dollar climbed to a three-week high by trading above 78 yen line. At 5 p.m., the dollar bought 77.97-98 yen compared with 77.52-62 yen in New York and 77.69-70 yen in Tokyo at 5 p.m. Monday.
Japanese Finance Minister Jun Azumi greeted the decisions made by the BOJ Tuesday and expected the central bank to handle monetary policy appropriately.
Together with the fourth extra budget and the reconstruction demand, the measures are expected to provide an impetus to the business activity in the country which was considered basically flat by the BOJ, due to the debt crisis in Europe and the appreciating yen.
But analysts warned the influence of the measures might turn out to be short-lived again this time and there is possibility of more steps ahead.