Bank of Japan Yields to Political Pressure, Adds $128 billion to QE

From the Bloomberg,

Japan’s central bank unexpectedly added 10 trillion yen ($128 billion) to an asset-purchase program and set an inflation target after an economic slide fuelled criticism it has been slower to act than counterparts.

An asset fund rose to 30 trillion yen, with a credit lending program at 35 trillion yen, the central bank said in Tokyo today. The BOJ said today that it will target 1 percent inflation for now. The overnight lending rate stayed between zero and 0.1 percent.

Stocks rose and the yen weakened against the dollar as the central bank expanded stimulus for the first time since October to revive an economy that shrank 2.3 percent in the fourth quarter. Lawmakers had urged extra efforts to counter deflation after the Federal Reserve adopted a 2 percent inflation target and the European Central Bank expanded its balance sheet.

Today’s decision “shows the BOJ bowed to political pressure,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “There will probably be limited impact on the yen’s gains.”

Twelve of 13 economists surveyed by Bloomberg News had anticipated no change in stimulus or rates.

Obviously the BoJ succumbed or ‘bowed’ to the blackmail or pressures applied by the politicos. This announcement basically fulfills my contrarian expectations (the mainstream didn't see this coming).

Here is what I wrote last Sunday,

…politicians have been pressuring the Bank of Japan (BoJ) to ease further or face a revision of the BoJ law in order to “give the government more room to intervene in monetary policy”. This is an example of the sham in the so-called central banking independence.

Central banks are politically influenced directly or indirectly. The BoJ will be stepping on the QE gas pedal. Yet, if Japan’s government manages to remold on the BoJ law which gives Japanese politicians the space to intervene directly, then the yen will be faced with greater risk of hyperinflation.

There will be more to come. Central banking independence? Duh!