Tokyo, Feb. 14 (BNA): The Bank of Japan made an offer to buy unlimited government bonds on Monday, moving to curb rising long-term interest rates in the world’s third-largest economy.
The Bank of Japan set the benchmark 10-year government bond purchase rate at 0.25%. The market price rose close to this level recently amid speculation that the Bank of Japan may start to undo its ultra-loose monetary policy in line with other central banks such as the US Federal Reserve.
The Bank of Japan’s bid did not receive any offers, but its impact on the rate cut still remains. The last time the Bank of Japan made a similar move was in July 2018, the Associated Press reports.
The latest decision highlights the BoJ’s intention to keep interest rates very low as inflation remains well below the target rate of 2%. The Japanese benchmark interest rate has been kept at -0.1% for years.
Japan has maintained a near-zero interest rate policy for years to counteract the trend toward deflation, or lower prices. Business activity slowed as the country’s population aging and growing.
The coronavirus pandemic has added to those problems, and Bank of Japan Governor Haruhiko Kuroda has repeatedly said the bank supports keeping interest rates very low.
Japan is not completely immune to inflationary pressures, but it has been less affected than many other major economies as central banks moved to raise interest rates that had remained low to support markets and reduce the impact of the pandemic.
High interest rates can discourage investment and hinder business cash flow. The Bank of Japan announced its plans for unlimited bond purchases last week.