Bank of Japan may once again pumped money into the economy

Bank of Japan closer to a resumption of pumping money into the economy, allowing the bank reserves placed on its accounts, increased to a level comparable to the levels achieved in the midst of the practice seven years ago.

Although the central bank is unlikely to revert to full-scale quantitative easing, which is affected liquidity and is not a key interest rate, it can keep the markets afloat, by offering them more money than they can absorb the commercial banks.

But analysts say the increase in reserves will not help support the economy, since the excess money will simply fall in bank accounts in cases of weak corporate demand for loans. "While the company did not begin to borrow more money does not penetrate the sector - said Hirokata Kusaba of the Mizuho Research Institute. - The Bank of Japan should provide long-term loans market or buy riskier assets, although he may not be ready for it. "

Bank of Japan did not withdraw from the market of money pumped back as a result of currency intervention last week. Thus, deposits in the accounts of commercial banks at the central bank rose to 17.1 trillion yen (202.7 billion U.S. dollars).

On Tuesday, this volume increased to 19.4 trillion, up 20% higher than in early September. He is expected to exceed 20 trillion yen by the end of the month, reaching levels of 2003, when the central bank pumping money into the market to achieve the necessary liquidity through quantitative easing.

Itself the Bank of Japan says its current policy of quantitative easing is not, since its purpose is to interest rates, and no amount of liquidity.

However, he did not object to maintain the markets with money, hoping it would further reduce the cost of borrowing and weaken the yen. "Balancing the provision itself does not mean too much. But if it leads to lower cost of credit, it can be useful for the economy "- said a source familiar with the opinion of the Bank of Japan.

The Bank believes that it can keep the overnight interest rate at around 0.1% per annum without removing too much money from the market. If it becomes difficult to keep rates from falling below 0.1%, Bank of Japan may lower it to zero or to add to his statement a single line, allowing the temporary drop in rates below the benchmark, say analysts.