The Bank of Japan, Japan's central bank, decided on the 14th to keep the policy interest rate unchanged and to reduce the scale of long-term government bond purchases.
According to Nihon Keizai Shimbun (Nikkei), the Bank of Japan held a two-day Monetary Policy Meeting until that day and kept the current policy interest rate of 0 to 0.1% unchanged.
The monthly long-term government bond purchase amount of 6 trillion yen will be reduced. Although the Bank of Japan decided to continue bond purchases even after ending the negative interest rate policy in March, it has announced since last month its intention to reduce bond purchases as part of an exit strategy from large-scale monetary easing (quantitative easing reduction).
If the Bank of Japan reduces bond purchases, long-term interest rates will rise, which has the effect of increasing the value of the yen.
However, until the next meeting, the existing policy of maintaining bond purchases will be continued. They will confirm market participants' opinions and decide on a specific reduction plan for the next 1 to 2 years at the next meeting.
According to Nikkei, the total government bond holdings of the Bank of Japan stood at 581 trillion yen as of the end of last year. This is six times the amount in 2013 (94 trillion yen).
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