Follow us on:   

Bank of Japan alters course … sort of
September 21, 2016, 1:52 pm

BOJ Governor Haruhiko Kuroda has analysts scratching their heads as the new policy shift appears to alter quantitative easing, but not really [Xinhua]

BOJ Governor Haruhiko Kuroda has analysts scratching their heads as the new policy shift appears to alter quantitative easing, but not really [Xinhua]


Citing worries about deflation and hoping to keep encouraging lending, the Bank of Japan by majority vote decided to keep interest rates steady at -0.1 per cent but changed its fiscal stimulus targets.

It removed its quantitative easing target of 80 trillion yen ($780 billion) a year and instead said it would target 10-year interest rates to keep them at zero.

This new target, or yield curve control means it will buy as many long-term Japan Government bonds to ensure that their yields – or zero rate target – is met.

However, it said it would continue to buy back government bonds to the tune of 80 trillion yen.

The policy announced today by BOJ Governor Haruhiko Kuroda has left some analysts scratching their heads.

On the one hand, it appears there is a policy shift away from quantitative easing and the purchase of government bonds to create liquidity in a bid to reach the BOJ target of two per cent inflation.

On the other hand, the quantitative easing purchases remain intact but are just not referred to as part of the overall stimulus scheme.

Amid some other changes announced today, Kuroda appeared to bow to market pressures to balance out the BOJ’s purchase of Exchange Traded Funds (ETFs) so that it no longer allegedly favors the Nikkei.

ETFs are also known as investment funds that are traded much like stocks on the exchanges.

Previously, the BOJ had allocated 5.7 trillion yen ($55.5 billion) to three indices including the Nikkei, the Topix and JPX-Nikkei, with some financiers accusing the central bank of bias toward the former.

On Wednesday, the BOJ said it would allocate 2.7 trillion yen ($26.4 billion) to buying ETFs exclusively from Topix, while the remaining amount will be divided between Nikkei and JPX-Nikkei.

Japanese markets reacted positively despite some now accusing the BOJ of leaning too heavily in Topix’s favor.

The Nikkei closed up 1.91 per cent to 16,807.62, while the Topix rose 2.76 per cent to 1,051.79.

Other Asian indices also welcomed the BOJ fiscal change: Shanghai’s benchmark index rose 0.10 per cent to 3,025.874 while Hong Kong’s Hang Seng jumped 0.59 per cent to 23,669.90.

South Korea’s Kospi continued its strong weekly performance and rose 0.51 per cent to 2,035.99.

The BRICS Post with inputs from Agencies

Leave a Reply

Your email address will not be published. Required fields are marked *

Anti-Spam * Time limit is exhausted. Please reload the CAPTCHA.