Anonymous asked in Social ScienceEconomics · 10 years ago

Bank of Japan boosts aid to $150 billion?

The bank's board was meeting today as the share market dived to try to instil confidence in the nation's financial system with the record $148 billion (12 trillion Yen) injection.

My question is, how could this POSSIBLY help? They're not donating the money to aid, they're injecting the money into Japans economy. Wouldn't this simply cause inflation and reduce the Yen?

Are the banks pretending to help, when they're really reducing the worth of the Yen by inflation and INCREASING the amount of yen needed to rebuild?

Help me understand, please.

2 Answers

  • 10 years ago
    Favorite Answer

    The additional liquidity is not meant to provide direct aid. Cash for the economy is like fuel for a car. The purpose of the liquidity injection by the Bank of Japan is to ensure that the economy continues to run and avoid a situation that the economy runs out of 'fuel' and investors from panicking. However, it seems that the liquidity injection was not sufficient to contain a widespread loss of confidence and even more agressive measures are required after the stock markets continue to drop. At this point, any inflation concerns have to take a backseat. The more immediate and important goal has to be to ensure that the financial markets continue to function.

  • Anonymous
    10 years ago

    The disaster is likely to cause panic. the Nikkei has gone down 6% already in one day. The Yen is also moving down from 81 to 82 Yen a dollar today. If the Nikkin would do nothing, it might cause the bank-run and the abrupt recession.It will unlikely to cause inflation to increase money supply in such a situation. The public debts which is already 252% of GDP will keep increasing for sure.The question is that Japan is ready to borrow from foreign sources. I don't think so. It's the land of discipline with downward credit rating,but it still sits on the huge mountain of foreign reserves and US Treasury bills.

    Go Japan.

    Source(s): Anjaree
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