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Japan’s central bank moves to jolt the economy

Haruhiko Kuroda is the newly appointed governor of the Bank of Japan, the country’s central bank.

TOSHIFUMI KITAMURA/AFP/Getty Images

Haruhiko Kuroda is the newly appointed governor of the Bank of Japan, the country’s central bank.

TOKYO — Japan is taking aggressive action to lift consumer prices, encourage borrowing, and help pull the world’s third-largest economy out of a long slump.

As the US Federal Reserve has, Japan’s central bank plans to flood its financial system with more money — its most far-reaching step to date to get consumers and companies to borrow and spend.

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The Bank of Japan’s action will also drive down the value of the yen. A cheaper currency will make Japanese goods — from Toyota cars to Sony TVs — less costly for Americans and other foreigners. But it will make US goods more expensive in Japan.

Major central banks around the world are acting to stimulate their economies. On Thursday, the European Central Bank’s president, Mario Draghi, said the ECB may do more to shore up the ailing economy of the euro alliance. The ECB left its benchmark interest rate unchanged at 0.75 percent, but Draghi said an interest rate cut was discussed Thursday. The ECB is also considering ‘‘various tools’’ beyond rates in case more help is needed.

The Fed expects to keep short-term rates at record lows at least until US unemployment falls to 6.5 percent from the current 7.7 percent. It also plans to continue buying $85 billion a month in bonds to keep borrowing costs down.

‘‘The central banks are being more activist than we’ve seen in decades,’’ said Timothy Duy, an economist at the University of Oregon. ‘‘One central bank after another has to do more because economies aren’t improving as fast as would have been expected.’’

Dan Akerson, chief executive of General Motors Co., told CNBC he fears the Bank of Japan’s policies will give Japanese automakers a price advantage in the United States. ‘‘They’re an export economy,’’ Akerson said. ‘‘You have to be suspicious of what they’re doing and why.’’

But many economists say the rest of the world will benefit, too: A faster-growing Japan will buy more products and services from the United States, China, and Europe.

‘‘We could see some faster and sustainable growth now in Japan,’’ said Bernard Baumohl, chief global economist at the Economic Outlook Group. ‘‘That will obviously help the global economy.’’

Japan’s economy has been sputtering for two decades. Last year, weak consumer spending kept prices flat. The Bank of Japan hopes to increase inflation to 2 percent within about two years. Economists say consumers will start spending if they know prices are going rise.

Eswar Prasad, an economist at Cornell University, cautioned that Japan needs more than easy-money policies. It needs to reduce debt and reform policies that protect weak firms from competition, he said.

Critics also say that without wage increases to match the price hikes, many consumers may be even less willing to spend.

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