When the BOJ meeting begins in four hours they will have a menu of easing options that includes.
- A 2% inflation target
- Open-ended easing to reach the target
- Buying foreign bonds
- 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).