The Bank of Japan maintained its expansionary monetary policy on Tuesday and extended special loan programs to help buoy economic growth, signalling its resolve to keep the positive mood generated by premier Shinzo Abe's reflationary policies from fading.
The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away.
But the Nikkei stock average <.N225> surged 3.1 percent and the yen sagged on its decision to extend special loan facilities by one year and double the size of funds available to banks. [ID:nL3N0I71QM]
BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash.
"We have an engine with big horsepower, so it makes sense to have stronger tires," he told reporters after the decision.
While some investors viewed the loan program expansion as a policy signal the BOJ may take a more accommodative stance if necessary, Masashi Murata, senior currency strategist at Brown Brothers Harriman, cautioned that the reaction in the Japanese government bond market suggested this was not the case.
"Bank shares drove the Nikkei, which drove the yen, but JGBs did not react much," he said.
As widely expected, the BOJ on Tuesday maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589-$687 billion).
The central bank also stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world's third-largest economy can weather the pain from a sales tax increase in April without additional stimulus.
"The BOJ already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo.
Source: Reuters
The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away.
But the Nikkei stock average <.N225> surged 3.1 percent and the yen sagged on its decision to extend special loan facilities by one year and double the size of funds available to banks. [ID:nL3N0I71QM]
BOJ Governor Haruhiko Kuroda said the expansion was aimed at enhancing the transmission mechanism of quantitative easing by encouraging banks to boost lending instead of sitting on piles of cash.
"We have an engine with big horsepower, so it makes sense to have stronger tires," he told reporters after the decision.
While some investors viewed the loan program expansion as a policy signal the BOJ may take a more accommodative stance if necessary, Masashi Murata, senior currency strategist at Brown Brothers Harriman, cautioned that the reaction in the Japanese government bond market suggested this was not the case.
"Bank shares drove the Nikkei, which drove the yen, but JGBs did not react much," he said.
As widely expected, the BOJ on Tuesday maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589-$687 billion).
The central bank also stuck to its assessment that Japan is recovering moderately, a sign it remains confident the world's third-largest economy can weather the pain from a sales tax increase in April without additional stimulus.
"The BOJ already expects the economy to contract immediately after the sales tax hike, so this cannot be the basis for additional easing," said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management in Tokyo.
Source: Reuters
