Weighing the BOJ options

When the BOJ meeting begins in four hours they will have a menu of easing options that includes.

  1. A 2% inflation target
  2. Open-ended easing to reach the target
  3. Buying foreign bonds
  4. Cutting interest on excess reserves below 0.1%

The fourth option could be the the most disruptive in the near-term, explains Reuters Breakingviews.

That [0.1%] payment, which is greater than the yield on two-year bonds, offers banks a big incentive to carry on hoarding cash. Lowering the rate to zero might encourage lenders to deploy funds in riskier credit (helping small companies), longer-duration government bonds (helping the government) or foreign assets (helping the economy by weakening the yen).

Author: Adam Button

Adam Button is the managing editor of ForexLive™. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.

2 Comments

  1. Do you expect a breakout after the meeting… most likely bullish?

  2. hi Adam, i think they will shuffle cards this time and about me the trap all with small amount of yen, so market will trap and spikes up and down like fireworks
    :) ;)

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