BoJ Rejects Need for Negative Deposit Rates
Key Global Foreign Exchange Indicators on December 7
BoJ Governer Kuroda says no to negative deposit rates
On December 7, 2015, the BoJ (Bank of Japan) Governor Haruhiko Kuroda dismissed any requirement of negative deposit rates to rescue the economy from the deflationary pressures surrounding it. The central bank maintained that the aggressive asset repurchase program of 80 trillion yen is sufficient to keep borrowing costs under check. The BoJ also noted that the QQE (quantitative and qualitative easing) program has been pushing the bond yields downward and that its impact has been evident across financial markets.
The BoJ also maintained that further concentration on increasing price indicators by bringing too many changes at once can have the potential to distort economic growth. The CPI (consumer price index) currently stands at 0.3% for October after falling to flat growth in September. Additionally, the ECB (European Central Bank) recently lowered the deposit rates further into the negative zone to pull up sluggish inflation levels. The stance and tone maintained by Governor Kuroda were in line with the monetary policy released last month, signaling no increase in the stimulus package. For further information on that, check out “ Japanese Yen Strengthens as BoJ Keeps Monetary Policy Unchanged.”
Leading economic index rises in October
The leading economic index of Japan increased to 102.9 points in October against 101.6 in September. On the other hand, the coincident index increased to 114.3 in October in comparison to 112.3 in the previous month. Foreign exchange reserves, on the other hand, fell in November to 1,233.0 billion dollars versus 1,244.2 billion dollars in October.
Impact on the market
After BoJ Governor Kuroda’s speech, the iShares MSCI Japan Index (EWJ) was trading 0.24% lower at the close of trade on December 7, 2015. In contrast, the WisdomTree Japan Hedged Equity (DXJ) remained on a flat note.
Japanese ADRs (American depositary receipts) on US exchanges were trading on a negative note. Leisure goods maker Sony (SNE) ended lower by 0.35%. In the banking arena, Mitsubishi UFJ Financial (MTU) fell by 1.1%, while Sumitomo Mitsui Financial (SMFG) fell by 0.65%.
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