Welcome to illuminati silver, we tell you
the truth about silver. Today is Wednesday 21st September 2016 and
we are looking at the Bank of Japan’s decision not to lower interest rates today.
The Bank of Japan has kept interest rates unchanged, but said it would aim to keep yields
on 10-year government bonds at around current levels of 0%. It’s also aiming to push inflation
above the 2% target rate, which was set more than three years ago and will continue to
buy assets such as government bonds, at the rate of 80tn yen ($787bn) a year.
Negative interest rates have squeezed Japan’s financial sector and keeping 10-year bonds
at zero percent – as opposed to allowing them to slip into negative territory – should help
bank earnings and improve returns for insurers and pension funds.
The question analysts are asking the policy changes would be successful.
Tim Condon, chief economist for Asia at ING said
“I don’t think it’s going to be easy to get the 2% inflation target. It’s an Abenomics
problem, not the Bank of Japan’s problem.” Michael Hewson, chief market analyst at CMC
Markets UK, said: “Ultimately while these actions may well help
the banks, it’s doubtful they will help the Japanese economy that much, and in some ways
it shows how little flexibility the central bank has, given how experimental policy is
now becoming. To sum up, this morning’s actions by the central bank are not so much an easing
as a tinkering around the edges of a failing policy.”
The Bank of Japan kept its benchmark rate on hold at -0.1%. It introduced negative interest
rates in January this year, hoping that commercial banks will use their reserves to lend to businesses,
in an attempt to counter the country’s economic stagnation.
In our opinion, Japan being the world’s third largest economy has shown that despite
its low interest rate policy over the past 20 years, improving consumer spending is no
easy matter. A number of colleagues in Japan’s financial circles believe that the negative
interest rate policy is a failure and has also hurt the profitability of banks because
their excess reserves were hit by a charge. So the decision NOT to lower rates further
has in itself been seen as a short term boost for markets and the yen – which is now trading
lower against the US dollar. But this is unlikely to last.
Japan’s government must do more to deliver the goods on structural reforms as part of
its Abenomics policy to boost growth, rather than continue to rely on the central bank.
Will this happen, yes it will eventually, either voluntarily or the result of a complete
financial meltdown. Time will tell which occurs first.
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