The Bank of Japan, which first took its key interest rate below zero on January 29, last week unveiled limited additional stimulus measures that didn’t lower the benchmark further or increase its bond buying program.
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Head of the central bank, Haruhiko Kuroda, left the door open for further monetary stimulus. But they have pulled off record lows in recent sessions on growing worries that the BOJ may be out of ammunition and less inclined to more radical action.
On Wall Street Friday, the broad-based S&P 500 and tech-rich Nasdaq both ended slightly higher, rising 0.2 and 0.1 percent, respectively, following robust earnings from tech giants Amazon and Google parent Alphabet.
Oil falls below $40/brl for first time since April: Oil prices are in the midst of some aggressive declines over the past couple of months, as the high set in early June just above $51.50 has led into near-constant lower-lows and lower-highs. More ETFs will be purchased, but there was no change to the deposit rate nor the government bond buying program.
The post-meeting statement provided support to the markets with the pledge of a comprehensive assessment of quantitative easing effectiveness at the central bank’s next meeting on September 20-21.
Speaking in Tokyo, the Japanese economy minister Ishihara said that Japan’s economy lacks strength in spending and investment and the government won’t do wasteful public works projects. “The market is picturing an end to Kuroda easing”.
There is little consensus on what the BOJ will do next month.
Since the BOJ introduced negative interest rates in February, bank executives have voiced skepticism about the effect of the policy, saying it isn’t boosting loan demand from corporate clients.
Overnight indexed swaps have nearly completely priced out a chance of a rate cut in the coming few months.
Business confidence is sitting at its lowest levels since Abe swept to power in late 2012 on a ticket to fix the once-booming economy. Brent crude, which is used to price worldwide oils, rose 23 cents to $42.37 a barrel in London, after closing at $42.14 a barrel the day before.
Some investors also think the BOJ could abandon its target of increasing its bond holdings by 80 trillion yen ($782 billion), possibly switching to a targeted amount of bonds it will hold. It is already buying far more JGBs than increases in net issuance.
Japanese media said another would-be successor, Shigeru Ishiba, minister for regional revitalisation, was considering declining to stay in order to prepare for a run at Japan’s top job when Abe’s LDP leadership term expires in September 2018.
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“If that happens, the 10-year yield is likely to return to the positive territory”, she added.
