The Strategist

Bank of Japand expectedly keeps negative rate at December meeting

12/19/2019 - 10:06

The Bank of Japan kept the interest rate at a negative level - minus 0.1%, according to a statement from the financial regulator following the December meeting.

nakashi via flickr
nakashi via flickr
The decision coincided with the expectations of analysts. Seven members of the regulator were in favor of maintaining the negative interest rate, two were against. The Japanese Central Bank introduced a negative interest rate of minus 0.1% in January 2016.

At the same time, the Central Bank confirmed the decision to continue targeting the yield of 10-year government bonds at a level close to 0%. The yield of securities may increase or decrease depending on economic activity and the price level. The monetary base will continue to increase by about 80 trillion yen per year, the Bank of Japan said in a release.

The Japanese central bank also maintained an annual buyback of ETFs at around 6 trillion yen and assets of real estate investment trusts (J-REIT) at around 90 billion yen. Depending on market conditions, the repurchase volume may be increased or decreased. The repurchase volumes of commercial papers (CP) and corporate bonds were again maintained at 2.2 trillion yen and 3.2 trillion yen per year, respectively.

The Central Bank expects that the trend toward moderate growth in the Japanese economy will continue, as it suggests that the impact of the slowdown in the growth of foreign economies on domestic demand will be limited.

Among the risks for economic prospects, the Japanese regulator named the consequences of protectionist measures, the situation in developing economies and export-oriented countries such as China, as well as the development of the situation around Britain's exit from the EU (Brexit).