Japan’s central bank chose to keep its policies for sustaining a stronger economy mostly unchanged at a policy meeting that ended Wednesday.
Advertisement
The Japanese central bank kept interest rates at 0.1% which applies to the deposit facility, for example for banks that have excess liquidity and place the money in deposits at the central bank.
Earlier, Japanese stocks rallied, with the Nikkei and the Topix indexes rising 1.9% and 2.7%, respectively, after the BoJ said 2.7 trillion yen ($26.60 billion) of its exchange traded fund purchases would be linked to the bank-heavy Topix index.
“It’s true that more than three years have passed (since we deployed QQE)”.
“Although the BoJ maintains its commitment to achieve 2 per cent inflation at the earliest possible time, today’s decision suggested that the BoJ is not so serious”.
Analysts at Accendo Markets said the Bank of Japan’s move could deter the Fed from an immediate rate rise.
Nicholas Wall, co-manager of the Old Mutual Global Strategic Bond fund, agrees that the policy is created to move inflation expectations, thereby keeping banks profitable with a steeper yield curve.
The Fed raised interest rates for the first time in almost a decade last December but weak economic data and global uncertainty have prevented it from raising the rates further. Some analysts thought the central bank would take further steps to bolster economic growth. “The BOJ has done so too and clearly has been successful”. “They want to steepen the yield curve but barely”.
The BoJ announced what it considered to be a big overhaul in monetary policy during September’s policy meeting.
“We will ease further when necessary”.
In a statement, the BoJ explained the quantitative and qualitative monetary easing [QQE] measures was proving successful, as government bond yields, lending rates, and interest rates on corporate bonds had all declined considerably in the six months since it implemented negative interest rates. Raising inflation targets to above 2% is vague and a significant departure from central banks previous approaches.
“I think that figure continues to be slightly elevated”, he said.
In its review, the bank blamed its failure to hit its inflation target on a drop in oil prices, a sales tax hike at home in 2014 that dented spending, and trouble in overseas economies. It’s very effective in the long-term perspective. That’s why the new policy framework can respond to changes in the economy and prices more flexibly.
Advertisement
The dollar fell more than 1 percent against the yen to 100.56 yen in North American trading, its lowest since August 26 when USA gross domestic product numbers revealed the United States’ economy was growing slower than anticipated.
