Nikkei reports the BOJ plans to keep rates negative
A report from Nikkei on the BOJ is doing the rounds. Read it here.
It's been characterized by a newswires as saying the BOJ "plans to position taking interest rate futures into negative territory"
That weirdly-written headline isn't exactly accurate.
The story says the BOJ will maintain its -0.10% rate but on going further it says this:
Some observers had predicted that the bank would use the review as a chance to scrap negative rates in light of objections from the financial sector over diminished profitability. The BOJ instead appears intent on sticking to the policy.
Any decision to take rates deeper below zero will require careful consideration of the yen's exchange rate and the state of the broader economy. And debate will likely proceed cautiously. "It's not as though we can keep lowering rates forever," a BOJ official said.
So there might be some consideration but it doesn't sound promising.
An important caveat also says the BOJ will consider trimming purchases of 25-year and longer bonds in order to boost longer-term yields. That's a yen positive (the market is selling yen at the moment).
They also note that the BOJ "will likely forgo" purchasing foreign bonds, which is another yen positive.
Finally, they write that the BOJ will consider abandoning a pledge to hit the 2% inflation goal in two years while retaining a commitment to hit it at some undefined point.
Overall, I think the market is getting a bit ahead of itself here and might have it backwards. Then again, if they don't go further negative and are ruling out some of these other moves, then what have they really done?
You can read it and decide for yourself.
