Bank of Japan decided today:
1) Raise policy rate to 0.1%: exactly the Bank will encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent, i.e. Bank will apply 0.1% rate to current account balances held by financial institutions at the Bank (excluding required reserve balances),
2) The Bank will continue its Japanese government bonds purchases with broadly the same amount as before (about Yen 6 trillion monthly - $40 billion),
3) The Bank will discontinue purchases of ETFs and J-REITs (Japan real estate investment trust),
4) The Bank will gradually reduce the amount of purchases of CP and corporate bonds and will discontinue purchase in about one year.
Figure 1 graphically shows today's BoJ decisions (source: BoJ)
And key takeaways from BoJ statement:
1) As the virtuous cycle between wages and prices has become more solid, the price stability target (2%) will be achieved in a sustainable and stable manner toward the end of the projection period (fiscal 2025, i.e April 2025 – March 2026),
2) Japan’s economy is projected to continue growing at a pace above its potential growth rate,
3) Key risks to the outlook: a slowdown in the pace of recovery in overseas economies; commodity prices; and domestic firms’ wage- and the price-setting behavior.
Market reaction (Figure 2):
USDJPY +0,87%
Nikkei 225 +0,66%
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