JAPAN RATE: The Bank of Japan said it is imposing a 0.1 percent fee on some deposits left with the central bank, effectively a negative interest rate. In individual movers, Sky (LON:SKY) is outperforming the market after reporting record operating profit for the first half of its financial year.
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Financial markets were caught off guard on Friday as the Bank of Japan joined the growing band of central banks resorting to negative interest rates to fend off deflation and spur growth.
Equities were also underpinned by hopes the US Federal Reserve would go slow on future interest rate hikes following weaker-than-expected GDP data from the world’s largest economy.
The Nikkei share index moved up and down, and closed 2.8% higher at the end of the day. The yield on 10-year U.S. Treasuries fell 4 basis points to 1.95 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS was flat, while Australia.AXJO added a slight 0.1 percent.
“People are interpreting that as potentially contributing to reinvigorating global growth”, said McKinley.
The yen had surged more than two percent against the dollar this year as the volatility that has shaken global markets sent investors running for the Japanese unit, which is considered a safe bet in times of turmoil and uncertainty.
The loonie had traded as high as 71.58 cents United States overnight before the Bank of Japan unexpectedly cut a key interest rate to negative 0.1 per cent. The dollar later dropped below 70 cents U.S. briefly before rebounding.
Endeavour Silver Corp said Thursday it will will reduce production of the precious metal this year by more than a quarter because of low prices.
The BoJ said further cuts in its base lending rate would be considered if deemed necessary to boost consumption and investment and, thereby, inflation towards reaching the government’s 2% target.
Brent futures pared gains to rise 57 cents to $34.46 a barrel, while USA futures rose 11 cents to $33.32 a barrel. Despite the rally, the benchmark has fallen 8 per cent this month.
Policymakers hope that putting more cash in shoppers’ wallets will spur spending and move Japan closer to the bank’s 2.0% inflation goal. The policy decision is a possible boost for the economy but viewed by investors as negative for banks.
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The BOJ’s minus 0.1 per cent benchmark interest rate, reduced from 0.1 per cent, means that banks parking excess funds with the central bank are charged for doing so on a portion of those funds.
