The BOJ said it would apply a negative interest rate of minus 0.1 percent on selected current account deposits that financial institutions hold with it, a move that will effectively charge banks interest for parking excess deposits at the central bank.
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The yield on benchmark 10-year Japanese government bonds plunged to a record low of 0.09 percent, and the yen fell 1.87 percent against the USA dollar to 121.03 yen, on track for its biggest daily decline in over a year.
Reaction in Japanese stocks to the BOJ move was volatile, with the Topix swinging between gains of more than 3 percent and a loss of 1.6 percent following the announcement before closing 2.9 percent higher. Shares on Wall Street and in Europe rose around 2 percent, while MSCI’s all-country world stock index .MIWD00000PUS gained 1.73 percent.
There’s a particular curiosity to the BoJ’s decision to venture into NIRP now-in January 2016.
The Commerce Department publishes its first look at the US economy’s performance in the fourth quarter at 8:30 a.m. EST on Friday, with economists surveyed by Bloomberg expecting a reading of 0.8 percent annual rate growth over the period.
In contrast, the U.S. Federal Reserve has so far stuck to the script that it will gradually raise interest rates later this year. A turbulent start of the year triggered by concerns over slowing growth in China and tumbling oil prices, however, meant the index lost more than 6 percent overall in January – the worst monthly drop to start a year since 2008.
The Dow Jones industrial average .DJI rose 295.13 points, or 1.84 percent, to 16,364.77. The S&P 500 gained 46.88 points, or 2.48%, to 1,940.24 and the Nasdaq Composite rose 107.28 points, or 2.38%, to 4,613.95.
Two-year German bond yields touched a record low of minus 0.471 percent. US Treasury yields fell to four-month lows.
Germany’s 10-year Bund yield fell 7 basis points to 0.26 percent, its lowest since last April (LSE: 0N69.L – news).
Benchmark 10-year notes were last up 17/32 in price, pushing their yield down to 1.9261 percent after sliding to 1.91 percent, the lowest since October 2. BoJ Governor Haruhiko Kuroda also pushed back the timeframe of the government’s 2% inflation target by at least six months to between March and October 2017, after discouraging new data prompted the central bank to downgrade its inflation forecast for the year up to March 2017 to 0.8%, from its previous prediction of 1.4%.
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The dollar index .DXY , tracking the dollar against a basket of major currencies, rose 1.1 percent to 99.594.
