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BOJ introduced QQE with a negative interest rate

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 29, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Bali) - The Introduction of the "Quantitative and Qualitative Monetary Easing (QQE) with a Negative Interest Rate" by the BOJ, as explained in the Central Bank's statement, means that the outstanding balance of each financial institution's current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.

    Statement BOJ

    The Bank will apply a negative interest rate of minus 0.1 percent to current accounts that financial institutions hold at the Bank. It will cut the interest rate further into negative territory if judged as necessary.

    The Bank will introduce a multiple-tier system which some central banks in Europe (e.g.the Swiss National Bank) have put in place. Specifically, it will adopt a three-tier system in which the outstanding balance of each financial institution's current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.

    "QQE with a Negative Interest Rate" is designed to enable the Bank to pursue additional monetary easing in terms of three dimensions, combining a negative interest rate with quantity and quality.

    The Bank will lower the short end of the yield curve and will exert further downward pressure on interest rates across the entire yield curve through a combination of a negative interest rate and large-scale purchases of JGBs.

    The Bank will achieve the price stability target of 2 percent at the earliest possible time by making full use of possible measures in terms of the three dimensions
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