The Japanese central bank has pumped in an additional ¥8 trillion (£61 billion, $98 billion) in the country’s financial system in a bid to prop up investor confidence following Friday’s earthquake and tsunami.
Bank of Japan released funds in two tranches today, the first tranche of ¥5 trillion was released in the morning and another ¥3 trillion was released after news of radiation leak reached the market.
The central bank had pumped in ¥15 trillion yesterday. The Japanese main stock exchange Nikkei had dropped by around 10% today. It had fallen by 6% on Monday.
The government said the effects will be temporary.
Economics Minister Kaoru Yosano, after attending a cabinet meeting said: “Japan’s production and the economic power have not fallen”.
Terming the stock market slump as temporary, he added: “I think the market confusion will calm down in a short time”.
Today’s ¥15 trillion injection is the biggest ever single day operation by the central bank.
Analysts say that it will cost Japan probably hundreds of billions to rebuild the country.
Peter Morici – professor at University of Maryland said: “Japan will be poorer, for this disaster. Rebuilding will run down Japan’s financial wealth”, he added.
Japanese economy had just started signs of expansion after years of stagnation. China had overtaken Japan last month as the second largest economy in the world.
Bank of Japan has been holding key interest rates low in an effort to stimulate growth. The nine member policy board of the central bank decided to keep borrowing targets for the year at current levels.