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Japan's Central Bank Decides on Quantitative Monetary Easing
The Bank of Japan (BOJ) on Monday decided to adopt a policy of quantitative monetary easing by boosting liquidity in financial markets in an effort to keep the faltering economy from getting worse.
In a move that signals a major policy shift, the central bank decided at its Policy Board meeting to target cash balances held by financial institutions at the BOJ, effectively reinstating the zero-interest-rate policy.
The BOJ forwent an outright return to a zero-interest-rate policy, but the bank's latest measures would in effect help push short-term interest rates virtually to zero, money traders said.
The move follows a series of monetary easing steps decided last month. On February 28, the BOJ decided to cut the target for the unsecured overnight call money rate to around 0.15 percent from 0.25 percent and slashed the more symbolic discount rate to 0.25 percent from 0.35 percent.
Pressure on the central bank for additional monetary easing has been mounting following the government's downgrading of its economic evaluation and acknowledgment that the economy is in a state of deflation, both announced last Friday.
Japanese cabinet ministers and ruling party officials have also been calling on the BOJ to take additional monetary measures to deal with deflation.
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