The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action, but disappointing investors who had set their hearts on more audacious measures.
The central bank, however, said it will conduct a thorough assessment of the effects of negative interest rates and its massive asset-buying program, suggesting that a major overhaul of its stimulus program may be forthcoming.
At the two-day rate review that ended on Friday, the BOJ decided to increase ETF purchases so its total holdings increase at an annual pace of 6 trillion yen ($58 billion), up from the current 3.3 trillion yen. The decision was made by a 7-2 vote.
But it maintained its base money target at 80 trillion yen as well as the pace of purchases for other assets including Japanese government bonds.
It also left unchanged the 0.1 percent interest it charges to a portion of excess reserves financial institutions park with the central bank.
In one unexpected development, Kuroda ordered an assessment of the effectiveness of BOJ policy at the next meeting, which is scheduled for September.
"The BOJ did not live up to expectations," said Norio Miyagawa, senior economist at Mizuho Securities. "Increasing ETF purchases makes no contribution to achieving 2 percent inflation. The BOJ won't admit it, but it has reached the limits of quantitative easing and negative rates."
Japan’s currency jumped 1.7 percent against the dollar after the BOJ kept its government-bond buying target and policy interest rate unchanged, opting instead to increase the central bank’s exchange-traded fund purchases.
Some forecasts for second-quarter U.S. gross domestic product tumbled after a new report showed weaker inventories and a wider trade deficit in June.
Economists at JPMorgan Chase & Co. lowered their growth estimate to 1.7 percent from 2.2 percent, while the Federal Reserve Bank of Atlanta’s GDPNow projection declined to 1.8 percent from 2.3 percent. Others issued smaller reductions.
The combined advance estimates for trade and inventories issued Thursday provide a more timely update on inputs to GDP and may improve the accuracy of the growth numbers and limit the magnitude of next month’s GDP revisions.
The world’s largest economy grew at a 2.5 percent annualized rate from April through June, according to the median estimate of 76 economists surveyed ahead of Friday’s release. The updated projections cut it from 2.6 percent.
Oil prices fall to fresh April lows as oversupply bites
Oil prices fell to fresh April lows on Friday as slowing economic growth threatened to worsen ongoing oversupply of crude and refined products.
International Brent crude oil futures LCOc1 were trading at $42.42 at 0657 GMT, down 28 cents, or 0.7 percent, from their previous close, at their lowest since April.
U.S. West Texas Intermediate (WTI) crude CLc1 fell 27 cents, or 0.7 percent, to $40.87 a barrel, slipping below $41 for the first time since April.
Reference: Reuters, Bloomberg
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