It hopes this will be a disincentive to banks to save and prompt them to lend in another attempt to counter the continuing economic slump in the world’s third-largest economy.
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Japan’s Nikkei share index whipsawed after the announcement before ending up 2.8 percent, to mark a 3.3 percent weekly gain, while the benchmark 10-year JGB yield touched an all-time low of 0.090 percent.
“Irrespective of this surprise easing from the BOJ, the yen remains rather undervalued, especially after this knee-jerk fall past 120 (against the US dollar)”.
In December 2015, the inflation rate was only 0.1%, much lower than the 2% inflation target set by Bank of Japan.
Core inflation – stripping out highly volatile oil prices – has barely budged since last July, and there are some signs already that European activity is being hurt by global economic uncertainty and market turmoil.
“The bank will lower the short end of the yield curve by slashing its deposit rate on current accounts into negative territory and will exert further downward pressure on interest rates across the entire yield curve”. It closed 2.8 percent higher.
CNBC’s Jim Cramer doesn’t understand why investors reacted positively to news that the Bank of Japan unexpectedly adopted negative interest rates.
“Corporate Japan has accumulated substantial cash on balance sheets, while the Japan labor market is getting tighter”, Ajay Kapur of Merrill Lynch said in a recent report.
The Russian central bank kept interest rates unchanged at 11%, despite a deep recession that is causing growing discontent among Russians. It was the fourth straight month of year-on-year declines.
The Dow Jones industrial average rose 187.85 points, or 1.17%, to 16,257.49, the S&P 500 gained 19.82 points, or 1.05%, to 1,913.18 and the Nasdaq Composite added 49.32 points, or 1.09%, to 4,556.00.
Japan’s central bank at a policy meeting announced that financial institutions will be charged 0.1% on the excess reserves parked with it. Pimonwan Mahujchariyawong, deputy managing director at Kasikorn Research Centre, said this policy would be beneficial for Thai exporters in the long term, especially if Japan’s economy returns to healthy growth.
He said auto parts and machinery were among the Thai export sectors that would gain if the Japanese economy returned to a healthy growth, and while the yen will weaken because of the rate cut, it should not affect the Thai baht.
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According to the global financial services major, a rate reduction is likely as inflation may be in line with RBI’s January 2016 under – 6% target.
