No Stimulus from BOJ, Yen Increases

By TraderVox.com

Tradervox.com (Dublin) – After a two-day meeting, the Bank of Japan monetary policy makers decided to refrain from adding stimulus but strengthened the asset purchases fund by fund from a credit loan facility. According to a statement released today, the BOJ has expanded its asset-purchases program by 5 trillion yen to 45 trillion from 40 trillion it had previously. However, the bank also cut one of its loan facilities from 30 trillion to25 trillion. This decision led to a decline in stocks which was further supported by the central bank of South Korea’s decision to lower its borrowing cost. However, there is pressure from the political class as the Japanese Finance Minister urged the central bank to do more to spur economic growth in the country.

The move by the Bank of Japan has been dismissed as a technical move which cannot be referred to as monetary easing by Masaaki Kanno, a Chief Economist at JPMorgan Securities Co, in Tokyo Japan. The yen has continued to strengthen against the dollar and the euro after this decision. At the close of trading in Tokyo, the yen was trading at 79.33 per dollar as the Nikkei 225 Stock Average dropped by 1.5 percent to settle at 8,720.01. The Bank of Japan has been on a tight corner as it failed to attract enough bids for its six-month credit lending operation, this was the 14^th time it has failed to do so.

According to the BOJ statement released today after the meeting, the BOJ has promised to increase its short-term bond buying program which is a change from the previous strategy of buying long-term public debt. The bank left its interest rate unchanged between zero and 0.1 percent. The monthly bond purchases will remain at 1.8 trillion yen. The Bank of Japan has also stated that it will buy more treasury bills as well as remove some minimum bidding yield for securities which is expected to smoothen is operations.

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