Japan’s Latest Monetary Easing Move Stirred Up Currency Tensions
The Bank of Japan (BOJ) eased its policy further by lowering the benchmark interest rate to a range of 0-0.1%, from
the previous 0.1% target. It also pledged to keep the key policy rate at virtually zero until the end of deflation is in
sight. This is a move toward the zero-interest rate policy, where the BOJ introduced it for the first time in 1999 and
again in 2001. In addition, the BOJ said that it will create a ¥5 trn (US$60bn) fund through the expansion of its balance
sheet to buy government bonds and other assets. While some politicians had urged the central bank to boost buying
of government securities, the bank kept the target for monthly purchases of government bonds at ¥1.8 trn. It said that
the debt bought through the new facility would not be considered as applying to the BOJ’s rule for keeping its holdings
at less than the value of banknotes outstanding. This is to avoid fanning market concerns that the BOJ is handing the
government a blank cheque, possibly undermining long-term bond credibility.
Tracking The World Economy... - 06/10/2010
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