BOJ cuts key interest rate to 0.1% to try and boost Japan's economy

Friday 19th December, 03:19 PM JST

TOKYO —

The Bank of Japan cut its key interest rate to 0.1% from 0.3% Friday in an attempt to boost the recession-hit Japanese economy. The move, almost in line with market expectations, came amid growing government pressure on the central bank to implement additional credit-easing measures and to prevent the yen from appreciating further against the U.S. dollar.

Japan’s economic conditions have been ‘‘deteriorating,’’ the BOJ said in a statement, revising down its basic assessment and adopting the expression for the first time in six and a half years. It said in November that the economy was ‘‘sluggish.’‘

The BOJ’s eight-member Policy Board voted 7-to-1 to lower the target rate for unsecured overnight call money after the panel cut the benchmark interbank borrowing rate to 0.3% from 0.5% in October.

The central bank also decided to temporarily purchase outright commercial paper, or short-term debt issued by companies, in an effort to facilitate corporate financing at a time when firms are facing difficulty raising operating capital through financial markets.

The BOJ also said it will increase its outright purchases of Japanese government bonds to supply long-term funds and boost liquidity in capital and corporate debt markets.

Wire reports

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14 Comments

Dogdog at 04:32 PM JST - 19th December

The BOJ is shooting on blanks, every national banks nightmare. Its only other valid option is to lower interest rates from 0.1% to 0.05%. During the good years, 2004-08, the BOJ should have raised interest rates to a steady 1.5% or 2.5%. Then they would have had something to play with now.

However the belief that Japan was gonna live on a cheap yen and the resulting exports, which were subsidizing a failed domestic economy, forever was too tempting for them to behave responsibly.

Last port of call will be BOJ intervention in the FX and watch the flack that will come with that (Europe) 'If the Japanese can devalue their currency, why can't we?' (China) 'Yeah we'll have some of that.'
goldsounds at 05:01 PM JST - 19th December

God forbid Japanese get to hold a currency that's worth something! If you take this to its logical Keynesian conclusion we should just force everyone to spend every cent....that'll make us all rich!!

Personally, I prefer to have a currency with value. The dollar is going to hyperinflate to Zimbabwean Weimar Republic levels, and if Japan follows it down the slide we're all screwed.

Note to Japan: You don't need the U.S economy. They are bringing you down, and every cent you lend them is a cent you won't get paid back. Time to enjoy the fruits of your own labor and let them (my homeland no less) wallow in the mess they've made through easy credit from the Fed.
USB at 05:12 PM JST - 19th December

free money! woohoo!!
some14some at 06:22 PM JST - 19th December

Do they need cash flow when top automakers and elec makers are suspending their production.
MichaelJP at 07:05 PM JST - 19th December

Buy AUD while the Yen is strong and get a good term-deposit rate in Australia!
spudman at 09:37 PM JST - 19th December

Michael, but pay transaction fees and then tax on the interest and more transaction fees when you bring it back. The AUD is gonna tank next year so better to buy US corporate bonds now.
billclinton at 09:46 PM JST - 19th December

Buy AUD while the Yen is strong and get a good term-deposit rate in Australia!

sure, and wait a few years for the Aussie dollar to rebound on the back of US growth and emerging market demand for resources. No thanks. I have better ways to make my money than bet on an Aussie dollar. I would rather bet on the Kiwi. The Kiwi can rebound much faster.
Dogdog at 10:33 PM JST - 19th December

I would rather bet on the Kiwi. The Kiwi can rebound much faster.

Agreed, as long as NZ can get its deficit in order, which it hasn't since the mid-90s
billclinton at 11:09 PM JST - 19th December

That is because the communists have been in control forever. Damn Nanny state. Now that Mr. Key is in we should see some capital gains. (Sorry to offend any kiwis. I am just an investor)
zurcronium at 11:52 PM JST - 19th December

titanic, chairs moved.

yen has not moved much at all after this BOJ announcement.
30061015 at 12:06 AM JST - 20th December

yen has not moved much ...

Perception is 99% reality, reality is not the truth. The truth is, dollars are scary little pieces of Fed paper. Inflation anyone?
dontpanic at 12:59 AM JST - 20th December

The BOJ has no room to manoeuvre. Cant raise rates to give savers more money to spend as it will strengthen the Yen even more. Cant lower them enough to have an effect on borrowing and therefore spending as there's almost nothing left to cut.

Buying bonds and essentially recapitalising businesses is all thats left. Will it be enough to tide businesses over until market fortunes rise?
holyman at 07:52 AM JST - 21st December

sorry guys, a war may be in the brew...as always,the war machine runs the world...what the rich want now is payback, payback to set up the next century of scams and triva...learn to play ,allow your money to grow...take a chance..make a billion...join the gruop...hahahah...China has the right plan...listen and learn....etf on china nnooww
HeathenCabin at 02:25 AM JST - 22nd December

Government cuts the rate. The market decides the worth of the yen. The government intervenes. People who saved money, lose money/are robbed of worth. Gotta love government, screwing people over time and time again! Dear Leader Taro Aso has decreed this pleases him and the Japanese Government greatly.