There has been report in the financial media today that Bank of Japan (BOJ) may be considering charging negative interest rates on loans, which effectively means, BOJ will be handing out money to banks and pay them to lend to the economy. This is similar to recently launched European Central Bank’s (ECB) TLTROs, where negative rates will be charged to the banks, where it may go down to -0.4%.
As of now Japan is paying negative rates of -0.1% to some part of excess reserve. Bank of Japan (BOJ) will hold its two day monetary policy meeting next week and will announce policy move on 28th April, sometime during Asian hours.
Today’s disappointing manufacturing data, may provide the banks with additional urgency to act. Manufacturing PMI deteriorated to 48, while Tertiary industry index declined -0.1%.
Yen is in clear retreat after the news broke and currently trading at 110.3 per Dollar.
We could see further weakness in Yen as many would like to close their positions and book profit on the short side heading into BOJ policy next week, especially with such rumors hanging.
The material has been provided by InstaForex Company – www.instaforex.com