The Bank of Japan has expanded its stimulus package at the latest meeting, but has disappointed markets by not launching helicopter money.
The BoJ kept the benchmark policy rate at -0.1 per cent at the meeting and maintained its monetary policy base at ¥80trn per year. However, it has almost doubled its ETF buying, to ¥6trn, from ¥3.3trn, and has doubled its US dollar lending scheme to $24bn.
Some had been expecting an announcement of helicopter money, meaning the move did not go far enough for some. As a result the yen rose and government bond prices dropped after the announcement.
The yield on 10-year Japanese government bonds rose initially, to -0.18 per cent, while the Yen rose to ¥102.90 per US dollar, ending the day up 1.8 per cent at ¥103.37.
However, the news of additional ETF purchases boosted equity markets, with the Nikkei 225 ending the day up 0.6 per cent, after recovering initial falls.
BoJ governor Haruhiko Kuroda has promised more stimulus if needed, and the Japanese government is preparing details of a ¥28trn stimulus package.
Paul Tasi, director of research for Japan at Fidelity International, says: “With no helicopter money announced, the BoJ’s move today was undramatic and can 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.”