Bank of Japan prolongs stimulus

Source: Dukascopy Bank SA
On December 17, the Bank of Japan published its Monetary Policy Statement. The bank kept its interest rate at -0.10% and extended the non-government covid relief loan program.

Quoting the statement: "Financial conditions in Japan have improved on the whole, despite the continued significant impact of the novel coronavirus (COVID-19) on domestic and overseas economies. With regard to financial conditions surrounding large firms, issuance conditions for CP and corporate bonds have been favorable, and precautionary demand for liquidity has subsided in the loan market. Regarding small and medium-sized firms, their financial positions have been on an improving trend on the whole, but weakness has remained in some segments, such as the face-to-face services industry.

Given these developments, the Policy Board of the Bank of Japan, at the Monetary Policy Meeting held today, decided to extend the Special Program to Support Financing in Response to the Novel Coronavirus (COVID-19) in part by six months until the end of September 2022, with a view to continuing to support financing, mainly of small and medium-sized firms."

Released Document

Statement on Monetary Policy

On the release, the USD/JPY did not care for the announcement at all. There was not even a minor increase of volatility spotted.

On a larger scale, the pair has been slightly recovering throughout December.

Initial Reaction

Larger scale situation

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