The Bank of Japan’s decision to double the size of a liquidity program for banks may prove more effective in placating the government than stemming deflation.

The bank yesterday increased its three-month lending facility for banks to 20 trillion yen ($221 billion) in a 5-2 vote, a “monetary easing” that may help reduce borrowing costs and bolster corporate sentiment, Governor Masaaki Shirakawa said at a Tokyo press briefing.

There’s little sign that the initial effort helped the economy: bank lending has fallen for three straight months, prices tumbled by a record and wages dropped. Where the initiative did win plaudits is among politicians -- Prime Minister Yukio Hatoyama, facing a July parliamentary upper house election as his poll numbers subside, welcomed the move.

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By Catherine