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The Bank of Japan maintains its negative interest rate

March 19 2021, 11:38 am

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Tokyo, March 19 (AFP/APP): The Bank of Japan on Friday maintained its negative interest rate and tweaked its monetary easing programme as it battles to boost inflation and shore up the pandemic-hit economy.

The adjustment, which marginally expands the fluctuation in long-term rates for 10-year bonds that the bank will accept, is seen as a potential forerunner to further tweaks in policy. The bank also said it would allow more flexibility in its stock purchases, dropping a target for its intervention in the Tokyo stock market, which has strongly recovered since crashing in spring 2020 as the pandemic began to bite.

The bank’s policies were otherwise largely left untouched after its two-day meeting, with an interest rate of -0.1 percent left intact, as well as an annual ceiling on stock purchases. Tokyo’s Nikkei index tumbled 1.5 percent with selling picking up after the announcement. The central bank is attempting to tailor its policies to respond to the pandemic and keep on track towards its longstanding goal of two percent inflation, which remains far from sight.

“It is important to strike an appropriate balance between maintaining market functioning and controlling interest rates by allowing interest rates to fluctuate to a certain degree,” it said. “For the time being, the bank will closely monitor the impact of Covid-19 and will not hesitate to take additional easing measures if necessary,” it added.

Despite a spike in infections this winter, Japan has seen a comparatively small outbreak overall with around 8,700 deaths, and has avoided imposing the blanket lockdown seen in other countries.