Bank of Japan surprises with negative interest rate move; global stocks soar

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Old 30-Jan-2016
Post Bank of Japan surprises with negative interest rate move; global stocks soar

Japan’s central bank shocked markets today with plans to effectively charge lenders to park their cash with it, ramping up a long-running battle to kick-start the world’s number three economy.
The unprecedented decision to adopt a below-zero interest rate policy is the Bank of Japan’s latest weapon as it looks to spur bank lending and drive up inflation. In response, the Nikkei stock index soared almost 3% as the yen plunged.
BoJ chief Haruhiko Kuroda cited recent financial market turmoil and a China slowdown for ushering in a -0.1% rate on new reserves, and said the bank may go even further into negative territory. Rates currently are near zero.
“The Japanese economy is not isolated from the global economy,” he told reporters, after the bank’s first meeting of 2016.
“There has been big volatility in financial markets...Because of the uncertain outlook for emerging and commodity-exporting economies, particularly China, we see rising risks for corporate confidence” and consumers’ expectations for inflation, he said. “That is why we decided to introduce negative interest rates.”
Under the plan, commercial lenders would now have pay to park cash at the BoJ, giving them an incentive to boost lending, which policymakers hope would stoke economic growth.
Britain’s FTSE 100 rose 1.2% to 6,004.94 and France’s CAC 40 advanced 1.4% to 4,382.73. Germany’s DAX climbed 1.3% to 9,763.69. Futures indicated that Wall Street was set to extend gains. Dow futures added 1% and S&P 500 futures climbed 1.1%.
Mumbai: Market benchmark Sensex surged by 401 points to snap three straight weekly losses as investors built fresh long positions in the new derivatives series amid a firming global trend after Bank of Japan adopted a negative interest rate policy.
On a weekly basis, the Sensex recovered 435.03 points or 1.78% and the NSE Nifty rose 141.10 points or 1.90% to log first weekly gain this year.

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