Bank Of Japan's New Stimulus Measures Disappoint Some Investors; Here's What You Need To Know
The Bank of Japan announced Friday morning it will increase its purchases of exchange-traded funds. The central bank also shied away from introducing new stimulus measures, maintained its key interest rate and also made no changes to the pace of other asset purchases, including Japanese government bonds.
According to the Wall Street Journal, the central bank's decision to "modestly" increase its monetary easing is due to the growing consensus that the government is near the limits of its ability to jolt Japan's lagging economy.
The bank was under pressure to lower its key interest rate further into negative territory (from its current negative 0.1 percent) reflects a backlash from Japanese banks and the public after negative rates was introduced in February. However, the central bank did acknowledge the rate could be pushed lower in the future.
Meanwhile, investors immediately sold Japanese stocks following the Bank of Japan's announcement but stocks did rebound and the Nikkei index closed the day nearly unchanged.
The iShares MSCI Japan ETF (NYSE: EWJ) gained nearly 1.50 percent early Friday morning.
The central bank's announcement may have put to an end the possibility of introducing "helicopter money," or direct central bank underwriting of government debt.
Finally, the central bank said in its policy statement that combining monetary and fiscal stimulus measures could create "synergy effects."
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