Bank of Japan cuts economic support during pandemic


The Bank of Japan has announced plans to scale back its coronavirus emergency economic support program and reduce its corporate debt purchases to pre-pandemic levels as it follows the policies of other large global central banks to withdraw from the crisis.

However, the Bank of Japan has not changed its ultra-loose monetary policy because it is monitoring the impact of the new Omicron coronavirus variant.

Monetary support was launched in March 2020 and includes the purchase of corporate bonds and commercial paper, as well as the provision of cheap funds to financial institutions that provide loans to small businesses affected by the epidemic.

The central bank announced on Friday that it will complete the purchase of corporate bonds and commercial paper by the March 2022 deadline as scheduled, which will increase its holdings by 20 trillion yen (US$176 billion). The central bank said it will extend its loan program for small companies for six months to September.

The decision is in line with other central banks and has taken action this week to tighten monetary policy.Bank of England Thursday Upregulate Its benchmark interest rate in response to soaring inflation made the UK the first G7 economy to do so since the outbreak of the pandemic.

This The Fed also announced The plan to end pandemic support for the U.S. economy will double the pace of curtailment of government bond purchases.

After a two-day monetary policy meeting was held this week, the Bank of Japan decided to keep monetary leverage unchanged, guide the overnight interest rate to minus 0.1%, and guide the 10-year Treasury bond yield to about 0%, in line with expectations.

Friday’s policy decision made the Bank of Japan one of the most dovish central banks in the world. Capital Macros’ senior Japanese economist Marcel Thieliant said that this position will remain for the foreseeable future. constant.

This expectation has had a significant impact on the yen, since the end of September, the yen-dollar exchange rate has been below 110 yen.

After the announcement by the Bank of Japan on Friday, the exchange rate has barely changed and remained at approximately 113.5 yen per dollar within an hour after the announcement by the central bank.

Foreign exchange analysts said that for most of 2021, forecasts of the widening interest rate gap between Japan and the United States encouraged funds to adopt a trading strategy of shorting the yen.

Foreign exchange traders said that although some of these positions have been liquidated due to concerns about Omicron’s spread in recent weeks, short bets may be rebuilt in the next few days.

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