Bank of Japan keeps benchmark interest rates unchanged – Banking & Finance

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The Bank of Japan (BoJ) decided this Tuesday to keep benchmark interest rates unchanged, but slightly extended the trading range of ten-year bond yields, reducing the -its flexibility strategy.

At the end of the two-day meeting on monetary policy, the Japanese central bank chose to keep the short-term interest rate at -0.1% and committed to continue the flexible purchase programs so that the -bonds in 10 years remain around 0%, but modify the margin for the yield curve.

The admissible range for long-term interest rate fluctuations, which is currently +/-0.25%, will be widened to +/-0.5%, which in practice may have an impact on rates of the interest applicable to loans to individuals and the private sector.

The BoJ’s decision aims to “improve the functioning of the market and encourage the formation of a more agile yield curve, maintaining adaptable financial conditions”, the entity said in the report, which highlights the impact on Japanese markets of the volatility of foreign counterparts.

This situation led to a “deterioration in the functioning of the bond markets” which, if continued, could have a negative impact on the financial situation, “such as on the requirements for issuing corporate bonds”, some something the BoJ tries to avoid. .

The Japanese central bank hopes that the decision, adopted unanimously, will facilitate the transmission of the effects generated by the reduction strategy, through the sustainability with which it seeks to achieve inflationary stability.

Long-term public debt securities are considered an indicator of the future evolution of interest rates, and with today’s move, unexpected for most analysts, the BoJ gains room for the maneuver to continue applying the stimulus strategy in the context of rising inflation in Japan.

Japan’s consumer price index was 3.6% in October, the highest level in 40 years and above the BoJ’s 2% target, which resists raising rates and keeps the policy in the face of a slow economic recovery resulting from the covid-19 pandemic, unlike the central banks of the United States and Europe, with successive tax increases, since the beginning of the year , to try to curb inflation.

This distance between the entities led to a strong devaluation of the yen which made the import growing and the costs of the companies more expensive and led the Japanese authorities to intervene several times in the currency this year.

The currency market’s reaction to any easing of the BoJ’s easing measures was swift, and the yen rose sharply against the dollar after the announcement.


Source: Journal de Negócios from

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