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Was BoJ Decision Leaked?

Asian market were
thrown into chaos today as Nikkei News reported the Bank of Japan was
considering negative interest rates, apparently in the midst of the central bank’s
meeting.

According to Profit & Loss sources, the report
from Nikkei came 15 minutes before the official announcement that the Bank of
Japan was easing policy further by adopting negative interest rates.

The result was a spike
in USDJPY to 121.50 from 118.80, followed quickly by a move back below 120.00,
after which the pair settled at 120.50-80.

“It was crazy,” one
trader says. “The market spiked but no one knew if it was a real move on a real headline, so we had a
pullback, but then the announcement came and the market jumped again.”

Although it is
impossible to know how the discussion about negative interest rates became
public, sources are already asking about a leak. “Someone in the meeting was
either telling some people what was going on or they let slip before the
meeting what was going to be discussed,” a trading source says. “Either way,
something smells.”

By a 5-4 vote, the
Bank of Japan voted to introduce a rate of minus 0.1 percent on certain excess
holdings of cash.
 

During a press
conference BoJ Governor Haruhiko Kuroda said that the move to negative interest
rates did not indicate the central bank was stopping its quantitative easing
policy, stating that the Bank of Japan had not reached its limit on JGB buying.
He added that the move was aimed at building business confidence in Japan’s
commercial sector.

Colin_lambert@profit-loss.com   Twitter @lamboPnL

Colin Lambert

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