Takeaways From the Bank of Japan’s Policy Decision
By WSJ Staff
The Bank of Japan disappointed investors with its limited expansion of monetary stimulus Friday. Here are five takeaways from the central bank’s policy decision.
1. Easing Burden on Monetary Policy
The Bank of Japan’s decision to only modestly increase its monetary easing reflects a growing consensus that it is near the limits of its ability to to revive Japan’s stagnant economy. Gov. Haruhiko Kuroda has long vowed to do “whatever it takes” to generate inflation, yet chose restraint this month despite one measure showing that prices have been falling for months.
2. Deeper Negative Rates Off the Table for Now?
Despite high expectations for bold action, the BOJ chose not to lower a key interest rate further into negative territory this month, a decision that sent shares in Japanese banks higher. Mr. Kuroda has said the rate, currently at minus 0.1%, could be pushed lower, but the central bank’s decision not to do it follows a stinging backlash from banks and the Japanese public after it was introduced in February.
3. Investors Disappointed
Investors immediately expressed displeasure with the BOJ’s actions, pushing Japanese stocks lower and the yen higher–an unwelcome combination for the Japanese government and central bank. The benchmark Nikkei Stock Average later rebounded to just above breakeven, but the verdict was clear: Investors were underwhelmed.
4. So Much for Helicopter Money
Former U.S. Federal Reserve Chairman Ben Bernanke’s visit to Tokyo earlier this month, including a meeting with Prime Minister Shinzo Abe, had stoked speculation that Japan was preparing to introduce “helicopter money,” or direct central bank underwriting of government debt. Mr. Kuroda later dismissed that possibility.
5. Coordinated Fiscal and Monetary Stimulus
While the BOJ has rejected helicopter money, it did note in its policy statement that the combination of monetary and fiscal stimulus could have “synergy effects,” a nod to urging by Mr. Abe’s advisers that the BOJ align its easing policies with a government spending package to be outlined next week.