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Bank of Japan Releases a Flood of Cash - 2001-08-17

This week the Bank of Japan (BOJ) further eased its ultra-loose monetary policy to try to revitalize the ailing business sector. In the telecommunications industry, Toshiba launched a new phone model.

The Bank of Japan announced Tuesday it will flood the commercial banking sector with cash so that companies in need of loans will have greater access to capital.

The move is part of the central bank's policy to fight deflation and jump-start the economy at the same time. As part of the credit easing, the BOJ raised commercial bank reserves to $50 billion from $40 billion and said it would double its monthly purchase of government bonds.

Ron Bevacqua is a Tokyo-based economist for Commerzbank. He is skeptical that the BOJ's moves will succeed. "At this point, change in monetary policy will probably not change the picture as far as directly stimulating domestic economic activity," he says. "The demand for capital is not there. The only way monetary policy can work is by the Bank of Japan using its leverage to basically drive long term interest rates down to extremely low levels."

One industry which remains wildly successful despite Japan's economic woes, is mobile telecommunications. Manufacturers frequently launch new handset models to keep consumers interested. Electronics giant Toshiba has just unveiled a new phone, which contains a new gimmick: a camera with a flash. It is producing the handsets for J-Phone, the country's number three carrier popular particularly with the young people.

In the beverage sector, Japan's largest brewer, Kirin, announced its January to June profit fell 19 percent from the same period last year. The loss of more than $100 million was due to high advertising costs and strong competition from its chief rival, Asahi. Kirin says sales of soft drinks and other products helped it avert an even bigger profit squeeze.

Japanese record label BMG Funhouse hopes to capitalize on the incredible popularity of Japanese Prime Minister Junichiro Koizumi. It is about to release a compilation of the leader's favorite Elvis Presley songs. It will be sold only in Japan and will sell for $20.