The Bank of Japan increases the scale of economic support during the pandemic

The Bank of Japan announced plans to scale back its coronavirus emergency economic support program, easing corporate debt purchases to pre-pandemic levels as it trails other major global central banks. in phasing out crisis-era policies.

However, the BoJ made no changes to its extremely loose monetary policy as it tracks the impact of the novel coronavirus variant Omicron.

The monetary support, introduced in March 2020, includes the purchase of corporate bonds and commercial paper as well as the provision of cheap capital for financial institutions to extend loans to affected small businesses. epidemic.

The central bank announced on Friday that it will complete the purchase of corporate bonds and commercial paper, which will increase its holdings balance to 20 billion yen ($176 billion), by a March deadline. 3 in 2022 as scheduled. The central bank said it would expand its lending program to smaller companies for the six months through September.

The decision comes in line with other central banks, which have tightened monetary policy this week. Bank of England on Thursday lift up its benchmark interest rate in response to rising inflation, making the UK the first G7 economy to do so since the outbreak of the pandemic.

The The Federal Reserve also announced The end of the pandemic plan supports the US economy, doubling the rate at which it will ease its government bond purchases.

Following this week’s two-day monetary policy meeting, the BoJ decided to keep its monetary leverage unchanged, guiding the overnight rate at minus 0.1% and the 10-year yield at zero. around 0%, in line with expectations.

Friday’s policy decision makes the BoJ one of the world’s most dovish central banks, a position Marcel Thieliant, senior Japan economist at Capital Economics, said will remain in place going forward. near future.

Expectations of that have weighed heavily on the yen, keeping the Japanese currency below 110 yen per US dollar since late September.

The exchange rate was mostly unchanged on Friday’s BoJ announcement, holding at around 113.5 yen per dollar in the hours following the central bank’s statement.

For much of 2021, forecasts of a widening gap between Japanese and US interest rates have encouraged funds to adopt a short-term yen trading strategy, forex analysts said.

Currency traders said that although some of those positions have not been closed in recent weeks due to concerns about the spread of Omicron, short-term bets are likely to build. in the coming days, currency traders said.

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