Japan Overnight Call Rate Down To 0.30%. Yen Strengthens Further

Japan Overnight Call Rate Actual 0.30%, Expected 0.25%, Previous 0.50%

Release Explanation: This is the interbank overnight lending rate. It sets the tone for mortgages, commercial loans, and all economic lending criteria. An increase in Interest Rate will have the effect of slowing economic growth. A decrease in Interest Rate is used by a Central Bank to stimulate economic growth. Economic strength can create Inflation, raising Interest Rates is one of the easiest ways to contain Inflation. The Governments Finance Ministry dominate the Bank, whatever they want they get.

Trade Desk Thoughts: The Bank of Japan decided to cut the Overnight Call Rate, down to 0.30%. This comes, after the bank had kept the interest rate at 0.50% for almost two years, the lowest rate amid industrialized countries. Economists argue that the rate cut, will not provide strong relief to the Japanese economy.

The Japanese economy faces an increasing risk from the strength the yen has posted lately, hurting the economy’s engine –exports, and a falling stock market. Latest indicators suggest the Japanese economy might be facing a recession, something that has caused the central bank to switch its focus to downside risks

Forex Technical Reaction: The yen had a strong response to the news release. The yen fell 100 pips since the Asian session began, from which 50 pips were from around the release time. Against the euro, the yen fell 90 pips while against the pound it moved flat.

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