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A look At The Measures Of Japan Central Bank

The Bank of Japan survey highlighted strong pressures in the bond market

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The significant asset-purchasing initiative launched by the Bank of Japan in 2013 led to a sharp deterioration in the performance of the country’s bond markets, and these deteriorations persisted after relying on controlling the yield curve. Trader opinions shed light on the pressures arising from the prolonged overly accommodative monetary policy pursued by the central bank, impacting market liquidity in the world’s third-largest economy. This comes at a time when market expectations are growing that the Bank of Japan is contemplating abandoning its current policy in favor of raising excessively low interest rates.

As part of a comprehensive review conducted by the Bank of Japan on the impact of unconventional monetary policy measures that have persisted for 25 years on the economy and financial markets, former governor Haruhiko Kuroda implemented the quantitative easing program in April 2013. The aim was to stimulate the public and shift them away from a deflationary mindset by printing money and raising the inflation rate. After the large-scale bond purchases began to reduce market liquidity, the Bank of Japan pushed short-term interest rates into negative territory in January 2016.

With inflation surpassing the Bank of Japan’s targeted goal of 2% for over a year, many market traders anticipate that current governor Kozo Oida will scale back the extensive stimulus program approved by his predecessor next year. Oida announced his plan to conduct a comprehensive review to assess the pros and cons of various unconventional monetary easing measures adopted by the Bank of Japan. As part of this review, the Bank of Japan will hold a workshop bringing together academics to discuss this matter on Monday, and thereafter, the central bank will convene to review interest rates on December 18 and 19.

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