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Chief Cabinet Secretary Yoshito Sengogku said he welcomed the central bank's announcement. The decision stands "in concert with the government's efforts to overcome deflation," he told reporters, according to Kyodo news agency. In addition to a 915 billion yen stimulus package announced last month, Prime Minister Naoto Kan is expected to unveil new spending through a supplementary budget that could be as big as 5 trillion yen. The central bank's government bond purchases will help fund Kan's extra budget, which could spur some growth, said Christian Carrillo, head of Asia-Pacific interest rate strategy at Societe Generale. But it's unclear whether the Bank of Japan's steps will have a meaningful impact on the overall economy. "I wouldn't say it's something that will strongly stimulate the economy," Carrillo said. Tuesday's news comes amid speculation that other central banks may also ease monetary policy. Federal Reserve Chairman Ben Bernanke fanned expectations Monday when he said that the economy could be helped by another round of asset purchases by the central bank. The Fed, which meets next on Nov. 2-3, is considering launching a new program to buy government debt, a move aimed at driving down rates on mortgages, corporate loans and other debt. During the recession, the Fed ended up buying a total of roughly $1.7 trillion of mortgage securities and debt, as well as government bonds. Slowing growth in the U.S. is just one of the headaches facing Japan, which has relied on overseas demand to fuel its recovery. Figures last week showed that core consumer prices in August fell for the 18th straight month as a strong yen pushed import prices south. While lower prices may boost individual purchasing power, deflation hamstrings an economy. It plagued Japan during its "Lost Decade" in the 1990s, curtailing growth by dragging company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.
[Associated
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