Bank of Japan cuts interest rates to zero

THE JAPANESE government bond yield curve steepened yesterday after the Bank of Japan (BOJ) launched an asset buying scheme, while super-long yields rose on disappointment it was not more aggressive about buying debt.

The BOJ also cut interest rates to near zero and pledged to keep rates effectively at zero until prices were seen stabilising.

Such a commitment was expected to help support short to medium-term bonds.

In addition, since yields on such sectors are already very low, it may also help prod investors to buy long-term Japanese bonds such as 10-year bonds, market players said.

“The time horizon for keeping interest rates low was extended and clarified ... and that will make it easier to buy short and medium-term JGBs [Japanese government bonds],” said a dealer for a Japanese brokerage house.