Bas van Geffen, Quantitative Analyst at Rabobank, notes that the BoJ kept its monetary policy stance unchanged, including a negative interest rate of -0.1% applied to Policy-Rate Balances in current accounts held by financial institutions at the BoJ.
Key Quotes
“The Bank had sounded somewhat grimmer in its assessment of recent developments, explicitly pointing at a weakening of inflation expectations, external demand and exports. In a testimony before Parliament yesterday morning, Governor Kuroda repeated that the BoJ “will continue easing until stable 2% inflation has been achieved”.
Whilst Kuroda also argued that “theoretically there is room to cut rates to minus 0.5%” (in which he made an explicit reference to the situation in the Eurozone), this already sounds less aggressive than the references to Sweden and Switzerland made previously.
Moreover, the decision to exempt money reserve funds entrusted to banks from the negative rate as well, lend further support to the view that the Bank has been taken aback by the recent wave of criticism and is now even more concerned about the side-effects of its negative rates policy.”
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