Bank of Japan makes unexpected move

An unexpected move from the Bank of Japan: the central bank will extend the average maturity of government bonds in its portfolio – an effort to flatten out the yield curve – and it also announced a new ETF purchase programme.

The BoJ said it would extend the average maturity of its government bond holdings to 7 – 12 years, from 7-10 years, “with a view to encouraging a decline in interest rates across the entire yield curve.”

It also established a programme to purchase ETFs at an annual pace of about Y300bn yen, in addition to the current programme in which it buys about Y3tn of ETFs.

Under this new program, the Bank will purchase ETFs composed of stocks issues by firms that are proactively making investment in physical and human capital. The new program will start with purchases of ETFS which track the JPX-Nikkei Index 400.

The new scheme, which will begin in April 2016, was voted in by 6 to 3.

The yen weakened 0.6 per cent to 123.26 per dollar after the decision and the Nikkei 225 dug out of an early decline to rise as much as 2.7 per cent. The Nikkei then quickly retreated to a gain of just 0.5 per cent.

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