The central Bank of Japan (BOJ) has modified its massive asset purchase program started 3 years ago. At a pace of 80 trillion yens per year (USD 780 billion), Japan’s Quantitative and Qualitative Easing (QQE) aims at increasing inflation up to “price stability target” of 2%. Although the BOJ has failed to reach this goal, it has decided to maintain its QQE as well as it negative rate (-0.1%) to the Policy-Rate Balances in current accounts held by financial institutions at the Bank.
What’s new is the “yield curve control” with a view to keeping 10-year yields near zero as currently. In the end, even if Asian financial markets welcomed the BOJ’s announcement, this modification should bring more comfort to the banking sector but one may doubt this can trigger necessary dynamism for Japan’s economy to leave stagnation and deflationary risks behind.
As BOJ Governor Haruhiko Kuroda’s monetary policy isn’t being questioned, Japan continues to implement solutions of which there’s been no evidence of efficiency so far. If by abandoning its base money target the BOJ has reassured financial markets by leaving the door open to more easing, in fact it has only offered to “strengthen” what’s been done already.