Kuroda also said he is “prepared” to unleash additional monetary stimulus through expanding the BOJ’s asset purchase program or further reducing the deposit rate, or both, to achieve his 2% inflation target if necessary.
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The BoJ also lowered its assessment of inflation expectations to say they were “weakening recently”, acknowledging that its massive stimulus was not boosting economic activity as much as it had hoped.
Repeated attempts by the BoJ to stimulate the Japanese economy with lower interest rates and ever-larger bond buying programmes have had limited success.
But it wasn’t until the markets were really rattled by more bad news out of China this January that the Japanese currency really came into its own – rising 6% against the United States dollar as many Japanese investors repatriated their overseas holdings for fear of what will happen next.
TOKYO (AP) – Japan central bank choose Tuesday to keep its monetary policy mostly unchanged but noted a raft of risks for an economy making scant headway toward a sustained recovery. The S&P 500 added 1.6 per cent and the Nasdaq led the advance, soaring 1.8 per cent. Investors also started to more aggressively questioned the effectiveness of central bank intervention.
Asian markets notched strong gains as the Bank of Japan opened a two-day monetary policy meeting and Chinese stocks reacted positively to remarks from a top Chinese securities regulator that promised new intervention if Chinese stocks fall.
“The meeting could see an acknowledgement of slightly improved conditions… the Fed wants to make sure these developments have taken hold before acting”.
On Monday, a key economic adviser to Prime Minister Shinzo Abe told Reuters that the BOJ is unlikely to ease policy further for the moment as it gauges the impact of the negative interest rate.
German 10-year yields fell 1.7 basis points to 0.26 percent.
The market will sift through the BOJ’s policy statements for any hints that it may be losing confidence in negative rates after the European Central Bank suggested it will have to be cautious on cutting rates ever deeper into negative territory.
USA retail sales fell less than expected in February, but a sharp downward revision to January’s sales reignited market concerns about the economy’s growth prospects.
The probability that the Fed will follow up its December rate increase – the first since 2006 – with another this year has swung wildly in the past three months. “However, the odds of a June rate hike have likely risen, particularly if, after this week, the Fed is perceived to have been faked out by stock market corrections in the space of six months”.
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Traders see less than 50% odds for two increases by year-end, contrasting with previous Fed guidance that it expects to raise interest rates four times in 2016.
