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BoJ stimulus measures fall short as it holds rates

BoJ stimulus measures fall short as it holds rates

The Bank of Japan (BoJ) has held interest rates at -0.1 per cent and announced it would double its purchase of exchange-traded funds (ETFs) to 6trn yen, from the previous pace of 3.3 trillion yen.

But the Nikkei 225 traded down while the yen surged as the stimulus measures confirmed by the Japanese central bank fell short of market expectations.

The bank kept its bond buying programme unchanged at an annual pace of 80trn yen, although it did increase the size of its US dollar lending program to $24bn to support Japanese firms’ overseas growth.

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Among the reasons for the decisions made at its monetary policy meeting, the BoJ cited the UK’s vote to leave the EU and the slowdown in emerging economies as the backdrop to increased uncertainty surrounding overseas economies and continued volatile developments in global financial markets.

The Nikkei 225 index has closed up just 0.6 per cent higher to 16,569.27, having fallen immediately after the Bank’s decision.

The Japanese yen was up by more than 2 per cent on the news, reaching 102.71 yen against the US dollar.

Paul Tasi, director of research, Japan at Fidelity International, said the BoJ’s move could be viewed as “slightly positive”.

“By leaving the negative interest rate policy unchanged and with no changes to the monetary base, there will be no yield curve pressure and no further pressure on banks. Banks will also benefit from the increased dollar lending facility. Increased ETF purchases will help with cross share unwinding and support the market,” he said.

The BoJ surprised markets by moving interest rates into negative territory in January this year.

Earlier this week, prime minister Shinzo Abe revealed a 28trn yen stimulus package, including 13trn yen of new fiscal measures, designed to boost the economy.