Digital News Report – Stock prices in Japan and China shot-up after a surprise announcement by the Bank of Japan. The Nikkei is up 137.70 points (1.47%) to 9,518.76 Tuesday. The Shanghai index is also 44.98 points (1.72%) higher to 2,655.66.
The Japanese central bank cut the uncollateralized overnight call rate to around 0 to 0.1 percent.
The interest rate will remain near zero until the bank judges “that price stability is in sight, on condition that no problem will be identified in examining risk factors, including the accumulation of financial imbalances.”
This move was expected by some who have been watching signals provided by government officials. The goal is to help Japanese manufactures who have suffered from an appreciating yen.
“Although Japan’s economy still shows signs of a moderate recovery, the pace of recovery is slowing down partly due to the slowdown in overseas economies and the effects of the yen’s appreciation on business sentiment,” the bank said in a statement released Tuesday.
Besides cutting rates the BOJ will be pumping yen into circulation by buying all sorts of assets. They will be buying government securities, commercial paper (CP), corporate bonds, exchange-traded funds (ETFs), and Japan real estate investment trusts (J-REITs).
Markets throughout the world are reacting positively.
By: Mark Williams