JAKARTA (TheInsiderStories) – Bank of Japan (BoJ) decided to apply negative interest rate of minus 0.1 percent at Wednesday meeting, said the governor today (07/15). The policymakers also sees the economic growth to shrink 4.7 percent and the consumer price index to fall 0.5 percent in the fiscal year until March 2021 due to the pandemic.
“The Bank will (also) purchase a necessary amount of Japanese government bonds (JGB) without setting an upper limit so that 10-year JGB yields will remain at around zero percent,” said Haruhiko Kuroda in the official statement.
He revealed, he Bank will actively purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about JPY12 trillion (US$112.26 billion) and about JPY180 billion, respectively.
As for commercial paper and corporate bonds, the Bank will maintain their amounts outstanding at about JPY2 trillion and about JPY3 trillion. In addition, until the end of March 2021, it will conduct additional purchases with the upper limit of the amounts outstanding of JPY7.5 trillion for each asset.
Kuroda assured that BoJ will continue with “Quantitative and Qualitative Monetary Easing with Yield Curve Control,” aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will continue expanding the monetary base until the year-on-year rate of increase in the observed consumer price index exceeds 2 percent and stays above the target in a stable manner.
“We will continue to support financing mainly of firms and maintain stability in financial markets through the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19), an ample provision of yen and foreign currency funds without setting upper limits mainly by purchasing JGBs and conducting the U.S. dollar funds-supplying operations, and active purchases of ETFs and J-REITs,” the governor stated.
For the time being, the Bank will closely monitor the impact of the COVID- 19 and will not hesitate to take additional easing measures if necessary, and also it expects short- and long-term policy interest rates to remain at their present or lower levels.
According to Kuroda, Japan’ economy has been in an extremely severe situation. However, he is projected the economy to grow 3.3 percent with expectations that economic activity will gradually return to the pre-pandemic level. He asserted such steps had supported the Japanese economy amid the pandemic with the government’ two extra budgets financing massive economic stimulus packages.
Going forward, Kuroda said the central bank will monitor developments related to Hong Kong, a key global financial market, amid intensifying political tension between the United States and China.
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