TOKYO -- Haruhiko Kuroda, the new governor of the Bank of Japan, delivered on his promise to drastically change Japan's economic policy to end a long, debilitating era of deflation.
The nation's central bank announced Thursday that it would double the amount of money in circulation and try to produce annual inflation of about 2 percent. "This is monetary easing in an entirely new dimension," Kuroda said after the bank's decision.
The central bank said it had inflated the economy by aggressively buying longer-term bonds and doubling its government bond holdings in two years. The bank said it would aim to create a robust 2 percent inflation rate "at the earliest possible time."
This major shift in Japan's monetary policy is a stark contrast to years of what many economists said was a halfhearted battle to end deflation. Deflation is a damaging fall in prices, profits and wages, and it weighs on economic growth.
Prime Minister Shinzo Abe, who took office in late December, has made beating deflation a central point of his economic policy. He wrestled with the bank's former leaders over creating the 2 percent inflation goal. Abe's pressure was so relentless that the bank's previous governor, the moderate Masaaki Shirakawa, resigned weeks before the end of his term. That departure led to the appointment of Kuroda, who shares Abe's economic philosophy.
Kuroda emphasized the break with history, repeatedly pointing to a graph showing the planned jump in the country's money supply as he answered reporters' questions on the bank's new policies.
"Incremental steps of the kind we've seen so far weren't going to get us out of deflation," Kuroda said. "I'm certain we have now adapted all policies we can think of to meet the 2 percent price target," he said.
If prices do not rise as expected, he said he "would not hesitate" to step up the bank's easing program.
Japanese stocks have soared in recent months on anticipation of a reversal in monetary policy under Abe, but in recent days the stock market had retreated as investors wondered whether Kuroda would make good on his promises.
Shortly after the bank's announcement, the benchmark Nikkei 225 index jumped from negative territory to end the day 2.2 percent higher. The yen weakened to 96.13 yen per dollar in Tokyo from about 93 yen before the announcement.