The Bank of Japan shocked markets this morning by altering its monetary stance after three years of ineffective policy decisions.

The bank refrained from cutting interest rates further from their -0.1 percent low, directing efforts into hitting its two percent inflation target.

The Bank of Japan will continue to buy $80 trillion worth of government bonds, adopting “yield curve control” whereby it will buy long-term bonds to keep yields at current levels.

Interest rates will be placed at the forefront of monetary policy going forward, with the Bank of Japan saying:

“The BOJ will seek to lower real interest rates by controlling short-term and long-term interest rates, which would be placed at the core of the new policy framework.”

The Bank of Japan’s governor Haruhiko Kuroda highlighted the effectiveness of this policy in the long-term, although adding that in the short-term, “there isn’t a clear link between the base money target and inflation expectations.”

“That’s why the new policy framework can respond to changes in the economy and prices more flexibly.”

21/09/2016