But imports also weakened, with purchases of oil, gas and other fuels falling almost 35 percent. Japan’s benchmark fell after August trade data came in weaker than expected.
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The BOJ maintained its 0.1 per cent negative interest rate, but abandoned its base money target and instead set a “yield curve control” under which it will buy long-term government bonds to keep 10-year bond yields around current levels of zero per cent.
The Australian dollar is stronger against the Japanese yen and the USA dollar after Japan’s central bank left its key interest rate unchanged and overhauled its monetary policy framework in another attempt to boost the country’s economy.
The Fed also holds a policy meeting in early November, but investors have all but ruled out a rate move just days before the US election. The Topix also tilts towards banks and export-oriented auto manufacturers, which are benefiting from BoJ holding fire on negative rates. The central bank is charging that rate on excess reserves it holds for banks to encourage them to lend more.
The 10-year Japan government bond yield surged into positive territory, trading as high as 0.011 percent, compared with levels as low as negative 0.062 percent before the announcement.
In a surprise move, the Bank of Japan on Wednesday (Sept 21) made a decision to adopt a target for long-term interest rates, overhauling its policy framework and recommitting to reaching its 2 per cent inflation target as quickly as possible.
The central bank said it will continue to purchase assets like government bonds at a rate of about 80 trillion yen ($787 billion) a year, seeking to achieve the 2 percent inflation target that they say could help spur sustained growth.
In a 61-page assessment, the BOJ said its “quantitative and qualitative easing”, monetary policy, known as QQE, had succeeded in ending deflation, or falling prices.
However, this commitment may have little impact since many economists have long said 2 percent inflation was overly ambitious goal.
“I think that fear has more or less receded”, said Mayuresh Joshi, fund manager at Angel Broking. “Now that the BOJ announced it, it means it understood the market’s concern that its effort to buy Nikkei-linked ETFs was distorting valuations and liquidity in some individual stocks”, said Fujito at Mitsubishi UFJ Morgan Stanley Securities. It also committed to overshooting its elusive 2 percent inflation target.
The world’s other major central banks have spent years struggling to rejuvenate their economies, to raise inflation and get businesses and consumers to spend more.
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A rise in interest rates is needed to revive the economy and give it the necessary push. Both hawkish and dovish comments from Fed officials recently have stoked volatility in financial markets, although consensus is now centered on a USA rate hike by year-end.
