TOKYO (AFX-ASIA) - ING Barings chief economist Richard Jerram said the Bank of Japan's surprise decision to ease monetary policy was "worse than doing nothing", having no real economic impact and undermining the bank's credibility.
The Bank of Japan said this afternoon that it decided to increase the outstanding balance of current accounts held at the central bank to around 6 trln yen from 5 trln previously.
The bank added that it will also increase its outright purchases of long-term government bonds to 600 bln yen per month from 400 bln currently "in order to smoothly provide liquidity under the new guideline".
The decision was made by majority vote.
The bank said it is encouraged by recent government reform moves, adding: "A series of monetary easing measures, including today's decision, are consistent with providing maximum support for such reform efforts in various areas."
However, ING's Jerram said the move seems inconsistent with earlier assertions by the bank that a further easing of policy would have little impact on the economy.
"This is worse than doing nothing," he said.
"A trillion here or there is not going to make any difference. They've been, in the past few months, explaining why this would not make any difference. All it does is damage their credibility." Jerram said the bank may be trying to encourage the government's economic reform plans, which are outside the bank's remit. "It seems they are trying to award gold stars. It's not their job." The impact on the financial markets is likely to be short-term, Jerram said, noting the short-lived spike in stock prices and the dollar/yen after the BoJ announcement.