Central Bank of Japan decided to adopt a negative interest rate policy
The Bank of Japan (BOJ) has issued an announcement to inform that on its meeting held on January 29, the Policy Board decided to introduce “Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate” in order to achieve the price stability target of 2 percent at the earliest possible time.
Going forward, the Bank will pursue monetary easing by making full use of possible measures in terms of three dimensions; quantity, quality, and interest rate.
The Bank will apply a negative interest rate of minus 0.1 percent to current accounts that financial institutions hold at the Bank.
It will cut the interest rate further into negative territory if judged as necessary.
Specifically, the Bank will adopt a three-tier system in which the outstanding balance of each financial institution’s current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively (see Attachment for details).
The Bank will carry out the Loan Support Program, the Funds-Supplying Operation to Support Financial Institutions in Disaster Areas affected by the Great East Japan Earthquake, and the Funds-Supplying Operations against Pooled Collateral at zero interest rates.
Read here the full announcement: Bank of Japan Statement
Following the Bank of Japan’s announcement Asian markets climbed, with most indexes trading up.
Asia markets rise, Nikkei takes roller-coaster rise after BOJ acts
The Nikkei 225, which traded down 0.6 percent before the announcement, surged as much as 3.51 percent soon after, before tumbling as much as 1 percent. It then surged to close up 2.80 percent, or 476.85 points, at 17,518.30.
The dollar-yen pair gained as much as 1.52 percent in the aftermath of the BOJ announcement, trading as high as 121.35, from around 118.50 before the news. The pair trimmed gains to trade around 120.82 after the Japan stock market closed.
Across the Korean Strait, the Kospi erased early losses after the BOJ announcement, closing up 5.12 points, or 0.27 percent, at 1,912.06
Chinese markets remained in positive territory with the Shanghai composite gaining 3.34 percent, while the Shenzhen composite was up 4.15 percent. Hong Kong’s Hang Seng index was up 2.11 percent.
Energy stocks gain across the board
