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THE TAKEAWAY: The Yen weakened as the Bank of Japan introduced Qualitative and Quantitative Monetary Easing including an increase of JGB purchases.
At the end of the two day meeting, the Bank of Japan announced that they were introducing a ‘Quantitative and Qualitative Monetary Easing’ program with an aim to achieve the price stability target of 2 per cent in two years. The Bank announced that it will now use ‘monetary base control’ in pursuing quantitative monetary easing which involves carrying out market operations that will expand the monetary base by 60-70 trillion Yen per year.
The Bank will also increase Japanese Government Bond purchases as well as increasing the average remaining maturity of about 3 years to 7 years. As a result of these, the Japanese Central Bank has decided to terminate the Asset Purchase Program with the outstanding purchases being absorbed into the JGB program.
In their statement, the policy makers stated that Japan’s economy was showing signs of a pickup with overseas economies seen to be growing at moderate paces. Despite the year on year rate of change of the CPI for Japan being negative recently, the Bank sees that indicators are suggesting a rise in inflation expectations.
The Official Target Rate was kept at 0.10 per cent.
The Yen was hovering around the 93.00 mark for most of the day as markets awaited the news and on the announcement, fell to past 94.00 against the U.S. Dollar.