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| Bank of Japan blames Brexit as it renews monetary stimulus | |
| (about 1 hour later) | |
| The Bank of Japan has announced a modest expansion of its monetary easing programme, blaming Britain’s decision to leave the European Union as the biggest uncertainty facing world markets. | The Bank of Japan has announced a modest expansion of its monetary easing programme, blaming Britain’s decision to leave the European Union as the biggest uncertainty facing world markets. |
| The central bank acknowledged government pressure for more action to drive the yen lower and help Japan’s legion of exporters, but stopped short of upping its bond purchases or cutting interest rates. | The central bank acknowledged government pressure for more action to drive the yen lower and help Japan’s legion of exporters, but stopped short of upping its bond purchases or cutting interest rates. |
| Instead the bank sanctioned an increase in purchases of exchange-traded funds as it attempted to accelerate inflation towards its 2% target. | Instead the bank sanctioned an increase in purchases of exchange-traded funds as it attempted to accelerate inflation towards its 2% target. |
| Related: Japan's economy shrinks again as Abenomics is blown off course | Related: Japan's economy shrinks again as Abenomics is blown off course |
| The moves disappointed the markets, which had expected another big influx of liquidity. The Nikkei stock average yo-yoed wildly in the aftermath of the move before falling nearly 2% in afternoon trade. | The moves disappointed the markets, which had expected another big influx of liquidity. The Nikkei stock average yo-yoed wildly in the aftermath of the move before falling nearly 2% in afternoon trade. |
| Other stock markets in the region were also down while futures trading indicated the FTSE100 and Dow Jones would open slightly down on Friday morning. | Other stock markets in the region were also down while futures trading indicated the FTSE100 and Dow Jones would open slightly down on Friday morning. |
| The yen rose 2% against the US dollar, which will frustrate government attempts to devalue the stubbornly high currency. | The yen rose 2% against the US dollar, which will frustrate government attempts to devalue the stubbornly high currency. |
| Not quite what traders were looking for...#BOJ disappoints and markets react: #USDJPY down 2% #Nikkei down 1.1% | Not quite what traders were looking for...#BOJ disappoints and markets react: #USDJPY down 2% #Nikkei down 1.1% |
| “Against the backdrop of the United Kingdom’s vote to leave the European Union and the slowdown in emerging economies, uncertainties surrounding overseas economies have increased and volatile developments have continued in global financial markets,” the bank said in a statement eagerly awaited by investors around the world. | “Against the backdrop of the United Kingdom’s vote to leave the European Union and the slowdown in emerging economies, uncertainties surrounding overseas economies have increased and volatile developments have continued in global financial markets,” the bank said in a statement eagerly awaited by investors around the world. |
| The bank had acted “in order to prevent these uncertainties from leading to a deterioration in business confidence and consumer sentiment”. | The bank had acted “in order to prevent these uncertainties from leading to a deterioration in business confidence and consumer sentiment”. |
| JGB yields surging post-#BOJ5-year: -0.317%10 year: -0.245%30-year: 0.27% pic.twitter.com/M1w4s2EzTH | JGB yields surging post-#BOJ5-year: -0.317%10 year: -0.245%30-year: 0.27% pic.twitter.com/M1w4s2EzTH |
| Some market experts said the lack of bold action suggested the bank had decided that the effectiveness of its huge monetary easing programme had reached its limits. | Some market experts said the lack of bold action suggested the bank had decided that the effectiveness of its huge monetary easing programme had reached its limits. |
| Chris Weston of IG said the key point from the statement was that there would be a review of the easing policy. | Chris Weston of IG said the key point from the statement was that there would be a review of the easing policy. |
| “Is this guidance that we may actually see negative rates being reversed? I suspect it could be,” he said in a note to clients. “It’s obvious that there has been a mini credit crunch in Japan and the banks have underperformed. Negative rates haven’t worked, in fact they have been a huge negative.” | “Is this guidance that we may actually see negative rates being reversed? I suspect it could be,” he said in a note to clients. “It’s obvious that there has been a mini credit crunch in Japan and the banks have underperformed. Negative rates haven’t worked, in fact they have been a huge negative.” |
| Norio Miyagawa, senior economist at Mizuho Securities, said ETF purchases would make no difference to inflation. “The BOJ won’t admit it, but it has reached the limits of quantitative easing and negative rates.” | Norio Miyagawa, senior economist at Mizuho Securities, said ETF purchases would make no difference to inflation. “The BOJ won’t admit it, but it has reached the limits of quantitative easing and negative rates.” |
| Heart-attack swings in the Japanese Yen post-BOJ pic.twitter.com/vnk4TEfP04 | Heart-attack swings in the Japanese Yen post-BOJ pic.twitter.com/vnk4TEfP04 |
| Exclusive pictures of the BOJ meeting https://t.co/0LHXVathtj | Exclusive pictures of the BOJ meeting https://t.co/0LHXVathtj |
| Japanese officials were under intense pressure to deliver as economists increasingly write off prime minister Shinzo Abe’s faltering bid to fire up the world’s number three economy, dubbed Abenomics. | Japanese officials were under intense pressure to deliver as economists increasingly write off prime minister Shinzo Abe’s faltering bid to fire up the world’s number three economy, dubbed Abenomics. |
| The UK referendum result in June hammered financial markets and sparked a yen rally that is threatening corporate Japan’s bottom line – and aggravating concerns about growth. | The UK referendum result in June hammered financial markets and sparked a yen rally that is threatening corporate Japan’s bottom line – and aggravating concerns about growth. |
| Abe announced a huge $266bn fiscal stimulus for the economy on Wednesday but government figures on Friday morning underlined the scale of the problems facing the country. | Abe announced a huge $266bn fiscal stimulus for the economy on Wednesday but government figures on Friday morning underlined the scale of the problems facing the country. |
| Spending by households across the country fell in June while inflation dropped for a fourth straight month, in a fresh blow to Abe’s war on deflation. | Spending by households across the country fell in June while inflation dropped for a fourth straight month, in a fresh blow to Abe’s war on deflation. |
| While the labour market remained tight and industrial production rebounded, rising 1.9%, there are growing fears about second-quarter economic growth. Japan dodged a recession in the first three months of the year. | While the labour market remained tight and industrial production rebounded, rising 1.9%, there are growing fears about second-quarter economic growth. Japan dodged a recession in the first three months of the year. |
| But the Bank of Japan said it would maintain its base money target at 80 trillion yen ($775bn) as well as the pace of purchases for other assets including Japanese government bonds. | But the Bank of Japan said it would maintain its base money target at 80 trillion yen ($775bn) as well as the pace of purchases for other assets including Japanese government bonds. |
| It also left unchanged the 0.1% interest it charges to a portion of excess reserves financial institutions park with the central bank. | It also left unchanged the 0.1% interest it charges to a portion of excess reserves financial institutions park with the central bank. |
| The BOJ said it would increase exchange-traded funds purchases so that its total holdings increase at an annual pace of 6 trillion yen ($57bn), up from the current 3.3 trillion yen. The decision was made by a 7-2 vote. | The BOJ said it would increase exchange-traded funds purchases so that its total holdings increase at an annual pace of 6 trillion yen ($57bn), up from the current 3.3 trillion yen. The decision was made by a 7-2 vote. |
| “The BOJ believes that its monetary policy measures and the government’s initiatives will produce synergy effects on the economy,” the bank said. | “The BOJ believes that its monetary policy measures and the government’s initiatives will produce synergy effects on the economy,” the bank said. |
| Business confidence has slumped to levels last seen when Abe won power in late 2012 on a ticket to fire up an economy beset by years of falling prices and weak growth. | Business confidence has slumped to levels last seen when Abe won power in late 2012 on a ticket to fire up an economy beset by years of falling prices and weak growth. |