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By Hiroshi Inoue
TOKYO (MNI) - The Bank of Japan sees no need for an extraordinary policy
meeting ahead of the mid-March gathering unless the yen appreciates sharply
through JPY105 towards JPY100, MNI understands.
On Tuesday, the U.S. Federal Reserve cut the Fed Funds rate by 50bps, the
first inter-meeting rate cut since October 2008 and there are some expectations
in financial markets that the BOJ could follow suit in coming weeks.
Policymakers are cognisant, however, that the BOJ should not fall behind
the curve if the the yen's appreciates as it did back in September 2008 when the
BOJ refused to take action.
A rise toward above JPY100 is regarded as a crucial level for the BOJ and a
look at its historical decisions shows a strong influence by sharp movements in
either the dollar/yen rate or the Nikkei stock index.
As of 0730GMT, the yen was trading at JPY107.50, briefly rising to
JPY106.85 in earlier Tokyo trade. The Nikkei stock index closed at 21,100.06 on
Wednesday, up 17.33 points, or 0.08%, from Tuesday's close, after briefly rising
Despite the heightened downside risks, the yen has not yet tested the BOJ's
tolerance levels, allowing it to keep policy moves to liquidity injections for
now. It refrained from operations Wednesday.
Earlier Wednesday, Governor Haruhiko Kuroda told lawmakers the BOJ would
act in an appropriate and timely manner if needed, without elaborating on when
Deepening the negative interest rate from -0.1% is one possible option, but
the BOJ has already acknowledged the unexpected side-effects of its negative
rate policy, introducing some counterbalances such as yield curve control.
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