Analysis-Bank of Japan's tricky balancing act squeezes Tokyo money market

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TOKYO : A Bank of Japan scheme introduced to support smaller lenders hurt by its ultra-low interest rates has perversely pushed up short-term borrowing costs, further complicating the central bank's plans to eventually ditch easy monetary policy.Years of ultra-low rates have squeezed profits of regional l

TOKYO : A Bank of Japan scheme introduced to support smaller lenders hurt by its ultra-low interest rates has perversely pushed up short-term borrowing costs, further complicating the central bank's plans to eventually ditch easy monetary policy.

In an unprecedented move, the BOJ decided on Tuesday to tweak rules of the reward scheme just eight months after its introduction. "As a result, the core of the BOJ's monetary policy seems to be wavering. The central bank must decide what it's going to prioritise." GRAPHICS: Japan's overnight call rate moves since YCC https://graphics.reuters.com/JAPAN-ECONOMY/BOJ/gdvzydbgrpw/chart.png

The BOJ's move on Tuesday to limit the payouts to regional lenders using its relief scheme underscores how the central bank's delicate balancing act to meet two goals - forcefully cap rates without hurting bank profits - is wobbling.

 

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