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The best is the enemy of the good. The Bank of Japan is not going to change its policy

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The best is the enemy of the good. The Bank of Japan is not going to change its policy
July 31
09:00 2018

Today, there was a meeting of the Bank of Japan, which addressed the issue of the monetary and credit policy of the country. As a result, it was decided to stick to the chosen course, not changing anything radically.

From the press release of the Central Bank we learned that the target yield of 10-year government bonds had been fixed at close to zero level. The interest rate on deposits of commercial banks in the Central Bank remained negative (-0.1%).

In principle, these decisions of the Central Bank in the land of the rising sun did not surprise the market, meeting its expectations.

The Central Bank of Japan did not change the asset purchasing program – it was decided to keep it at $ 720 billion a year.

The Bank of Japan said that they permitted small fluctuations in the yields of state bonds depending on the level of economic activity and inflation.

This is a natural consequence of the growth in the yield of 10-year government bonds of Japan to the level of 0.11%.

The Bank of Japan has also adjusted the volume of purchased securities of exchange-traded funds (ETF). Now the Central Bank will increase the volume of purchased securities relevant to the TOPIX index to 4.2 trillion yen per year (at the moment this value is 2.7 trillion yen). The purchase volume of ETF securities will be reduced by half: from 3 trillion to 1.5 trillion yen.

The press release says that the CBR rates will be kept at a very low level for a very long time.

The Bank of Japan recognized that it might take more time than expected to achieve the target inflation rate. Inflation in Japan in June was 0.8% in annual terms.

A forecast for GDP has also been issued, it is expected that this figure will increase by 0.8% over the next two years.

Conservative decisions of the Bank of Japan have caused a depreciation of the yen and a gradual fall of Japanese indices (TOPIX and Nikkei).

 

The material was prepared with the participation of Katya Gordon,
a leading analyst of the brokerage company CT Trade

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