Courtesy of Mish.
In the latest bit of interest rate insanity, the Bank of Japan Launches New Form of Policy Easing.
The bank will cap interest on the 10-year government bond at 0%, for as long as it takes to exceed its target of 2% inflation.
The Nikkei rose nearly 2% on the announcement, gold rallied $13, and silver $0.51.
Curiously, after an initial 1% decline, the Yen rose about 2% for a net gain of about 1% vs. the US dollar.
The Bank of Japan has launched a new kind of monetary easing as it set a cap on 10-year bond yields and vowed to overshoot its 2 per cent inflation target on purpose.
Its decision demonstrates that even eight years after the global financial crisis, central bankers are still willing to experiment with monetary policy tools as they struggle to escape from low inflation around the world.
“The price stability target of 2 per cent has not been achieved … [and] this is largely due to developments in inflation expectations,” said the BoJ on Wednesday. “Inflation expectations need to be raised further in order to achieve the price stability target.”
Although that commitment is vague, it marks a departure for global monetary policy, following the logic of economists such as Paul Krugman by making a deliberate “commitment to be irresponsible”.
Tweet of the Day
When Bank Of Japan Governor Kuroda feels the need to make the statement: “I don’t think the BOJ has become cornered,”-You know it has been.
— fred hickey (@htsfhickey) September 21, 2016
Is Abenomics Working?
On October 6, 2015 the Bloomberg editorial board made this ridiculous claim: Abenomics Is Working.
Yesterday we learned Japan Exports Fall More Than Expected.
