In what was a much anticipated and long-flagged move, the Bank of Japan announced that the uncollateralized overnight call rate will be set at 0 to 0.1%, the first raise since 2007 with the previous rate at -0.1%.
“The Bank considers that the policy framework of Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control and the negative interest rate policy to date have fulfilled their roles. With the price stability target of 2%, it will conduct monetary policy as appropriate, guiding the short-term interest rate as a primary policy tool, in response to developments in economic activity and prices as well as financial conditions from the perspective of sustainable and stable achievement of the target,” the BoJ wrote in a statement.
In separate announcements, the central bank detailed an outline of outright purchases of JGBs as well collateral and securities lending facility operations:
Conduct of short-term Funds-Supplying Operations against Pooled Collateral: Having been conducted with no upper limit since September 2022, the Bank will set the amount of offer per auction taking account of market conditions. The amount of offer will be notified when conducting the operations.
Conduct of the Securities Lending Facility: The current measures regarding the Securities Lending Facility, including “Relaxation of the Terms and Conditions for the Securities Lending Facility for the Cheapest-to-Deliver Issues” published on February 29, 2024, will remain effective for the time being. The Bank, however, will cease the measures specified in “Market Operations for Three On-the-Run Issues of 10-year Japanese Government Bonds” published on February 16, 2023.
Under the Securities Lending Facility, the Bank sells Japanese government securities (JGSs) with repurchase agreements to provide a temporary and secondary source of JGSs to the markets, with a view to facilitating the Bank’s money market operations as well as to contributing to smooth settlement of both JGSs and funds. The Bank will continue to take necessary measures when deemed appropriate.