Officials said the negative rates were brought in to “pre-empt the manifestation of risk and to maintain momentum to achieve the price stability target of 2%”. TMB Analytics forecasts 1-per-cent growth this year for Japan’s gross domestic product.
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The BOJ joined monetary authorities across Europe in betting that central bank rates below zero will cut borrowing costs for companies and households, driving demand for loans as well as encouraging investment in higher-yielding assets.
The Bank of Japan ramped up its 25-year losing battle against deflation yesterday by resorting to negative interest rates, triggering fresh global market volatility.
Commercial banks normally earn interest when they deposit money with a central bank, such as the U.S. Federal Reserve, instead of putting it into circulation in the economy in the form of a loan.
“I’d be looking for the FTSE to pick up a little bit from here and rise into the 6,100-6,200 point range”, Richard Griffiths, associate director at Berkeley Futures, told the newswire. Even though Russian Federation said there was no concrete plan for a coordinated cut in production, it was enough to push the price of oil higher.
Japan fell back into negative inflation for the first time since 2013 last Autumn – with core inflation now running at only 0.5%. In response to the question of how low the negative rate could go, the bank didn’t provide a clear reply, yet said that similar multi-tier systems are used in Switzerland, Sweden and Denmark, which have negative rates of minus 0.75 percent, minus 1.1 percent and minus 0.65 percent, respectively.
The pan-European FTSEurofirst 300 index closed 2.27 percent higher at 1,348.08. The BOJ move cemented expectations for further European Central Bank stimulus.
The policy was pioneered by the European Central Bank in June 2014 but had little effect on eurozone growth.
Cramer said lower interest rates overseas hurt the US economy because they stimulate foreign competition.
Equity investors were encouraged enough to nudge the Nikkei.N225 0.3 percent higher in slow early action.
The Dow Jones industrial average was up 124.3 points, or 0.77 percent, at 16,193.94, the S&P 500 was up 12.23 points, or 0.65 percent, at 1,905.59 and the Nasdaq Composite index was up 21.28 points, or 0.47 percent, at 4,527.96.
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The price of a benchmark barrel of crude oil briefly jumped above US$34 a barrel after the Bank of Japan’s announcement but was up only marginally from Thursday’s close later in the morning. The euro weakened to $1.0911 from $1.0932 but against the Japanese currency rose to 131.87 yen from 129.92 yen.
