The Bank of Japan decided on Tuesday to lower its key interest rate to between zero and 0.1 per cent to address the yen’s rise and the country’s slowing economy, the bank announced after a two-day policy meeting.
The central bank, which described the decision as “comprehensive monetary easing,” also said it would establish a 5 trillion yen (USD 60 billion) fund to purchase various financial assets including government bonds, it said in a statement. The central bank’s decision triggered the benchmark Nikkei 225 Stock Average to surge more than 1 per cent.
Japanese business leaders voiced their concern that the yen’s rise would erode their earnings and they urged the government to do more to counter the currency’s appreciation. The yen hit a 15-year high against the dollar on September 15, prompting Tokyo to sell the Japanese currency for the first time in six years. The central bank’s quarterly Tankan survey on business mood showed last week that big manufactures expect business sentiment to worsen in the next three months until December, given slower global economic growth and the yen’s appreciation.
To shore up a slowing economy, the government of Prime Minister Naoto Kan is considering spending as much as 4.8 trillion yen on a fresh stimulus package.
Japanese stocks rose on on Tuesday. The benchmark Nikkei 225 Stock Average gained 133.7 points, or 1.47 per cent, to close at 9,518.76 while the broader Topix index was up 9.9 points, or 1.2 per cent, at 832.64. Tokyo stocks ended mixed in the morning session as investors were cautious ahead of the central bank’s decision. The bank’s announcement in the afternoon triggered the Nikkei surge as high as 1.5 per cent. On currency markets at 3 pm (0600 GMT), the dollar traded at 83.81—84 yen, up from Monday’s 5 pm quote of 83.23—25 yen.
The euro traded at 1.3703—3706 dollars, down from 1.3734—3736 dollars Monday, and at 114.82—87 yen, up from 114.31—35 yen.
