BoJ: Negative rates surprise on the weekend – MUFG

By FXStreet FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, notes that in today’s decision, the BoJ announced the introduction of “Quantitative and Qualitative Monetary Easing with a Negative Interest Rate”.

Key Quotes

“The key change of course in the introduction of a -0.10% interest rate on current accounts that financial institutions hold at the BoJ. But crucially, the implementation of the negative rates will be through a three-tier system which is:

1) The Basic Balance: A positive interest of 0.1% will be applied on the average outstanding balance that each financial institution held during benchmark reserve maintenance periods from January 2015 to December 2015. BTMU calculates that as being JPY 220trn.

2) The Macro-Add-on Balance: A zero interest rate will be applied to amounts outstanding on required reserves for each financial institution. In addition the zero charge will apply to funds outstanding through the Loan Support Program and the Funds-Supplying Operation to Support Financial Institutions related to the Great East Japan Earthquake. BTMU calculates that balance adding to JPY 38.9trn. This balance is calculated as a ratio to the Basic Balance and will change over time.

3) The Policy-Rate Balance: A negative interest rate of -0.1% will be applied to all balances …read more

Source:: FX Street