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Japan Central Bank Revamps Policy To Boost Economy

Economy minister Akira Amari, who attended the policy meeting, praised Kuroda, giving him "very high marks,"

More aggressive monetary easing is a top priority, along with increased public spending to help perk up demand and reforms to make the economy more competitive in the long-run.

Abe had accused Kuroda's predecessor Masaaki Shirakawa, who stepped down on March 19, of balking at undertaking bold enough monetary easing to get the economy back on track. The steps announced Thursday under the first policy meeting chaired by Kuroda exceeded expectations in that regard.

"The first step is to get out of deflation and get a much higher nominal growth rate," Kozo Yamamoto, a senior lawmaker in Abe's Liberal Democratic Party, said Wednesday. A doubling of the money supply was needed to achieve that aim, he said.

The BOJ's policy reforms appear to be a major concession to government demands, despite the bank's ostensible autonomy.

The bank kept the benchmark rate at 0.1 percent. But instead of carrying out money market operations to meet interest rate targets that have long remained near zero, the central bank will focus on the monetary base, or total amount of cash in circulation and bank reserves, raising it by 60 trillion yen to 70 trillion yen ($637 billion to $744 billion) a year. The monetary base stood at 138 trillion yen ($1.45 trillion) at the end of 2012.

The idea is that increasing the amount of cash in circulation will inflate prices, including for assets, encouraging more spending by those who own shares and property.

"If prices don't go up, wages don't go up. If people believe prices will be higher six months from now, then they will believe it's best to buy now rather than later," Abe said in a parliamentary debate Tuesday.

___

Wiseman contributed from Washington. AP Auto Writer Tom Krisher contributed from Detroit.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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