Inside the Bank of Japan’s latest pro-growth push
TOKYO - Japan’s central bank chose to keep its policies for sustaining a stronger economy mostly unchanged at a policy meeting that ended Wednesday. But it said it will aim to push long-term interest rates higher. Here are some key points:
What’s the Bank of
Japan already doing?
Like
the U.S.
Federal Reserve, the Bank of Japan has been trying to get consumers and
companies to spend more. One way to do that is to keep interest rates very low,
to encourage borrowing. Another is pumping cash into the economy to push
inflation higher. The idea is that people will make purchases earlier to avoid
price increases in the future.
What’s not changing?
The
central bank plans to keep buying about 80 trillion
yen ($787 billion) in assets a year to put more money into circulation. It also
is keeping its key policy rate, the interest on excess reserves it holds for banks,
at minus 0.1 percent.
What is changing?
The Bank of Japan says it will adjust its purchases of
government bonds, the main asset it’s buying, to help push yields on
longer-term bonds, say 20-year or 30-year bonds, higher. That will help life
insurers and other financial companies earn more from their huge holdings of
those bonds.
What lies ahead?
Japan’s inflation rate is still near or below
zero, and the central bank says
it may cut its policy rate further as it strives to exceed a 2 percent
inflation target. It could also increase how many government bonds and other
securities it buys. So far, unlike with the Fed, it’s not talking about ending
its asset purchases or increasing interest rates on short-term investments and
lending.