“Even after the March monetary policy change, we expect interest rates to remain low and that real interest rates remain in deeply negative territory,” declared on Tuesday the Governor of the Bank of Japan (BoJ), Kazuao Ueda.
Featured Statements
We do not have a pre-established idea about how and when we will adjust interest rate levels.
We hope to reduce our bond purchases in the future, but we cannot say now when or by how much.
We will not immediately start unloading BoJ ETF holdings.
We will not make specific comments on currency levels and movements.
There are several factors behind currency movements.
Exchange rates should move stably reflecting fundamentals.
Monetary policy is one of the fundamental factors that affect currency movements.
Monetary policy is not explicitly about controlling currency fluctuations.
If currency movements have an impact on the economy or prices that is difficult to ignore, we will, of course, respond with monetary policy.
Frequently asked questions about the Bank of Japan
What is the Bank of Japan?
The Bank of Japan (BoJ) is the Japanese central bank, which sets the country's monetary policy. Its mandate is to issue banknotes and carry out monetary and currency control to ensure price stability, which means an inflation target of around 2%.
What has been the policy of the Bank of Japan?
The Bank of Japan has embarked on ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low inflation environment. The bank's policy is based on Quantitative and Qualitative Easing (QQE), or printing of banknotes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further relaxed policy by first introducing negative interest rates and then directly controlling the yield on its 10-year government bonds.
How do the decisions of the Bank of Japan influence the Japanese Yen?
The Bank of Japan's massive stimulus has caused the Yen to depreciate against its major currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat inflation levels that have been at record highs for decades. The Bank of Japan's policy of keeping rates low has caused the differential with other currencies to increase, dragging down the value of the Yen.
Will the Bank of Japan change its ultra-loose policy soon?
The weakness of the Yen and the rebound in global energy prices have caused a rise in Japanese inflation, which has exceeded the 2% target set by the Bank of Japan. Even so, the Bank of Japan judges that sustainable and stable achievement of the 2% objective is still not in sight, so a sudden change in current monetary policy seems unlikely.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
