The Bank of Japan has the pet shop gallahs in uproar after it’s late Friday cut into negative interest rates. From Goldman:
The Bank of Japan (BOJ) surprised by introducing a negative interest rate of 0.1% at the Monetary Policy Meeting (MPM) on January 28-29, while maintaining its monetary base target and Japanese government bond (JGB) purchasing program. Our base scenario called for additional easing at end-April, with today’s move seen as our risk scenario. The Bank called this move “Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate” and it was passed with a 5-4 majority vote.
We think the BOJ intended to cause a strong announcement effect on the forex market in particular, by implementing the measure Governor Kuroda had explicitly denied the idea of resorting to until now, when financial markets remaining volatile and macro data poor. The Bank said it is prepared to lower the interest rate further into negative territory if it decided this was necessary.
