BOJ Keeps QE in Check But Will Allow Yields to Rise More Naturally

At a two-day rate review that ended on Tuesday, the Bank of Japan kept its interest rate targets steady but for the first time adopted a forward guidance on future policy, saying it will keep rates “very low” for an “extended period of time.”

As its huge purchases dry up market liquidity and efforts to cap bond yields face difficulty, the central bank also said it would allow yields to rise more naturally and could slow asset buying if market conditions allowed.



Its governor, Haruhiko Kuroda, said the changes in its framework were partly to stamp out speculation that the central bank was about to exit its super loose monetary policy or raise rates.

The decision highlights the dearth of ammunition the BOJ has left to fire up stubbornly weak inflation, even as other major central banks emerge from crisis-mode policies and stock up policy tools to fight another recession.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza