RegionsAsia PacificBank of Japan launches new growth initiative

Bank of Japan launches new growth initiative

The central bank has tweaked its stimulus programme and is making a fresh effort to push Japan’s inflation rate above its 2% target.

The Bank of Japan (BoJ) has kept its benchmark interest rate unchanged at -0.1%, but indicated that further rate cuts are a “possible option” and introduced two adjustments to its monetary easing policy.

The central bank, which is attempting to kickstart Japan’s economic growth, promised to cap 10-year government bond yields at zero per cent – committing it to buying any bonds offered with a nil return, while preventing them from slipping into negative yield – and will also aim to deliberately overshoot its target inflation rate of 2%.

Since Japan’s asset price bubble bust at the end of the Eighties, the country has regularly attempted to escape deflation. The headline inflation rate for July was -0.4%

“The price stability target of 2% has not been achieved … [and] this is largely due to developments in inflation expectations,” the BoJ stated.  “Inflation expectations need to be raised further in order to achieve the price stability target.”

In response, the bank will maintain its government bond buying “more or less in line with the current pace” of 80 trillion yen (JPY) (US$787bn; £605bn) a year. However, fewer very long-term bonds will be purchased to make it easier for banks to earn profits by allowing the yield curve to steepen.

The BoJ became the latest central bank to introduce negative interest rates in January this year, in a bid to persuade commercial banks to use their reserves to lend to business. Some analysts suggested that its decision not to push rates further below zero or expand asset purchases was evidence that governor Haruhiko Kuroda has limited scope for additional easing measures.

Related Articles

China’s regulatory changes stimulate international interest

Asia Pacific China’s regulatory changes stimulate international interest

2m Michael McCaw
Singapore Fintech Festival day four – Investor Summit Deal Day

Asia Pacific Singapore Fintech Festival day four – Investor Summit Deal Day

5m Richard Hartung
Singapore Fintech Festival day three: trade finance, capital markets and financial inclusion

Asia Pacific Singapore Fintech Festival day three: trade finance, capital markets and financial inclusion

5m Richard Hartung
Singapore Fintech Festival day two: blockchain, India's digitalisation and the future of banking

Asia Pacific Singapore Fintech Festival day two: blockchain, India's digitalisation and the future of banking

5m Richard Hartung
Is Asia too risky for corporate investment?

Asia Pacific Is Asia too risky for corporate investment?

5m Richard Hartung
GTreasury & Visual Risk announce partnership to focus on integrated treasury and new markets

Asia Pacific GTreasury & Visual Risk announce partnership to focus on integrated treasury and new markets

7m Guest Writer
Singapore shipping groups to trial blockchain

Asia Pacific Singapore shipping groups to trial blockchain

8m GTNews
IMF warns China on growing debt load

Asia Pacific IMF warns China on growing debt load

8m Graham Buck