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Asian markets surge after Bank of Japan's shock move to negative interest rates – live Asian markets surge after Bank of Japan's shock move to negative interest rates – live
(35 minutes later)
7.41am GMT
07:41
Meanwhile, the Russian central bank is expected to leave interest rates on hold today, because further easing could exacerbate the rouble’s weakness.
The bank slashed rates by 6 percentage points to 11% in the first half of 2015 when western sanctions over Ukraine led to a deepening economic decline, but has left them unchanged since July. The country, which relies heavily on oil exports, has been hit hard by the slump in crude oil prices over the past year.
The rouble plummeted to all-time lows against the dollar last week when oil prices fell to fresh 13-year lows and global stock markets tumbled.
Some economists are even speculating that rate hikes could be back on the agenda soon. At its last meeting in December Russia’s central bank said it had drawn up a risk scenario that projected oil prices at $35 for the next three years, but they have since fallen below that level. Brent crude, the global benchmark, dropped below $27 a barrel last week but has since recovered to $34.72.
But Russia’s recession is far from over. A spate of economic data on Monday showed how dire the situation is: the economy shrank 3.7% last year, retail sales slumped more than 15% year-on-year in December, real wages fell 10% and capital investment declined 8.7%.
William Jackson, senior emerging markets economist at Capital Economics, said while the worst of Russia’s crisis has now passed, another year of recession looks likely.
Updated
at 7.44am GMT
7.25am GMT
07:25
The root of the BOJ’s decision today to effectively charge banks for new deposits is the dire state of the Japanese economy.
Today’s inflation figures showed that prime minister’s Shinzo Abe’s much-heralded attempts to kickstart the economy after years of stagnation are failing – dubbed “Abenomics”.
Prices are rising at just 0.5%, nowhere near the 2% Abe needs to lift Japan out of years of falling prices which have conditioned consumers to delay purchases in the expectation that things will eventually become cheaper.
For useful background, economics editor Larry Elliott wrote this analysis piece about Japan last year:
Related: Japan beats recession but the good news ends there
7.11am GMT7.11am GMT
07:1107:11
It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening.It looks like being a decent start to the European trading day. FTSE forecast to rise 71 points at the opening.
7.05am GMT7.05am GMT
07:0507:05
Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates.Investors and market experts have been caught out by the BOJ’s decision, which comes days after Kuroda said that the board was not considering negative rates.
Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters:Nicholas Smith, a strategist at CLSA based in Tokyo, told Reuters:
Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it.Kuroda had been saying that he didn’t think something like this would help so it is a bit surprising and it’s clear the market has been surprised by it.
But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending.But some felt it might not work very well because rates have been so low for long that banks have had plenty of opportunity to increase lending.
Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said:Martin King, co-managing director at Tyton Capital Advisors in Tokyo, said:
This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash.This is an aggressive all-stick-no-carrot approach to spurring investment, as depositors are essentially penalised for holding cash.
6.58am GMT6.58am GMT
06:5806:58
Kuroda: We have more policy ammunitionKuroda: We have more policy ammunition
Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework.Today’s steps don’t mean that we’ve reached limits to our [Japanese government bond] buying. We added interest rates as a new easing tool to our existing QQE framework.
6.56am GMT6.56am GMT
06:5606:56
6.53am GMT6.53am GMT
06:5306:53
Kuroda on prospect for further easingKuroda on prospect for further easing
Justin McCurryJustin McCurry
Kuroda again:Kuroda again:
We won’t hesitate taking additional (easing) steps by (expanding) the quantity, quality of money, as well as through interest rate (cuts) if needed to achieve our price target, while scrutinising risks to the economy and prices.We won’t hesitate taking additional (easing) steps by (expanding) the quantity, quality of money, as well as through interest rate (cuts) if needed to achieve our price target, while scrutinising risks to the economy and prices.
6.50am GMT6.50am GMT
06:5006:50
Kuroda on price risks and rationale for negative ratesKuroda on price risks and rationale for negative rates
Justin McCurryJustin McCurry
Kuroda adds:Kuroda adds:
Japan’s economy continues to recover moderately and the underlying price trend is improving steadily. But there’s a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.Japan’s economy continues to recover moderately and the underlying price trend is improving steadily. But there’s a risk recent further falls in oil prices, uncertainty over emerging economies, including China, and global market instability could hurt business confidence and delay the eradication of people’s deflationary mindset.
The BOJ decided to adopt negative interest rates ... to forestall such risks from materialising.The BOJ decided to adopt negative interest rates ... to forestall such risks from materialising.
6.47am GMT6.47am GMT
06:4706:47
Justin McCurryJustin McCurry
Kuroda has told journalists in Tokyo that the decision to adopt negative interest rates was taken with the 2% inflation target in mind, and in consideration of risks to Japanese business confidence posed by factors that include concern over the health of the global economy.Kuroda has told journalists in Tokyo that the decision to adopt negative interest rates was taken with the 2% inflation target in mind, and in consideration of risks to Japanese business confidence posed by factors that include concern over the health of the global economy.
Kuroda refused to comment on Thursday’s resignation of the economy minister, Akira Amari, but added:Kuroda refused to comment on Thursday’s resignation of the economy minister, Akira Amari, but added:
As before, the aim is to see Abenomics succeed.As before, the aim is to see Abenomics succeed.
UpdatedUpdated
at 6.48am GMTat 6.48am GMT
6.44am GMT6.44am GMT
06:4406:44
Kuroda is working his way through the statement issued earlier by the Bank of Japan, according to our man in Tokyo, Justin McCurry.Kuroda is working his way through the statement issued earlier by the Bank of Japan, according to our man in Tokyo, Justin McCurry.
The decision sent the yen plunging by up to 2% as capital seeks higher rates of return elsewhere.The decision sent the yen plunging by up to 2% as capital seeks higher rates of return elsewhere.
Quite how long the yen’s fall will last remains to be seen however because persistent low rates in Japan has done little to discourage investors from ploughing money into the country’s markets, which are seen as safe haven.Quite how long the yen’s fall will last remains to be seen however because persistent low rates in Japan has done little to discourage investors from ploughing money into the country’s markets, which are seen as safe haven.
6.37am GMT6.37am GMT
06:3706:37
Bank of Japan governor Haruhiko Kuroda speaking nowBank of Japan governor Haruhiko Kuroda speaking now
Bank of Japan governor Haruhiko Kuroda is speaking now ...Bank of Japan governor Haruhiko Kuroda is speaking now ...
Updates shortly.Updates shortly.
6.32am GMT6.32am GMT
06:3206:32
Markets surgeMarkets surge
Stock markets in Asia Pacific have yo-yoed wildly in the wake of the BOJ move, which spells yet another round of monetary easing in Japan.Stock markets in Asia Pacific have yo-yoed wildly in the wake of the BOJ move, which spells yet another round of monetary easing in Japan.
Generally speaking, traders have embraced quantitative easing in its various forms across the globe as it means cheap money and rising asset prices.Generally speaking, traders have embraced quantitative easing in its various forms across the globe as it means cheap money and rising asset prices.
In Europe, shares are expected to open up strongly this morning, according to futures trading.In Europe, shares are expected to open up strongly this morning, according to futures trading.
6.18am GMT6.18am GMT
06:1806:18
Japanese inflation slowed to 0.5%Japanese inflation slowed to 0.5%
Earlier on Friday, official figures showed inflation in Japan was 0.5%, way off the bank’s target of 2%.Earlier on Friday, official figures showed inflation in Japan was 0.5%, way off the bank’s target of 2%.
The BOJ hopes that the rates decision will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth.The BOJ hopes that the rates decision will encourage commercial banks to lend more, rather than keeping cash at the BOJ, and stimulate investment and growth.
The BOJ’s statement added that Japan’s economy was still recovering but headwinds from volatile global financial markets could undermine confidence.The BOJ’s statement added that Japan’s economy was still recovering but headwinds from volatile global financial markets could undermine confidence.
The statement said:The statement said:
Japan’s economy has continued to recover moderately, with a virtuous cycle from income to spending operating in both the household and corporate sectors, and the underlying trend in inflation has been rising steadily.Japan’s economy has continued to recover moderately, with a virtuous cycle from income to spending operating in both the household and corporate sectors, and the underlying trend in inflation has been rising steadily.
Recently, however, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy.Recently, however, global financial markets have been volatile against the backdrop of the further decline in crude oil prices and uncertainty such as over future developments in emerging and commodity-exporting economies, particularly the Chinese economy.
For these reasons, there is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected.For these reasons, there is an increasing risk that an improvement in the business confidence of Japanese firms and conversion of the deflationary mindset might be delayed and that the underlying trend in inflation might be negatively affected.
6.11am GMT6.11am GMT
06:1106:11
The BOJ governor Haruhiko Kuroda will give a press conference in about 30 minutes which should help explain the thinking behind the decision, which sneaked through on a 5-4 vote of the bank’s board.The BOJ governor Haruhiko Kuroda will give a press conference in about 30 minutes which should help explain the thinking behind the decision, which sneaked through on a 5-4 vote of the bank’s board.
The BOJ said it was adopting an interest rate of -0.1% for new excess reserves parked at the bank by financial institutions.The BOJ said it was adopting an interest rate of -0.1% for new excess reserves parked at the bank by financial institutions.
The rate will not apply to existing deposits. Existing current account balances will earn a 0.1% positive interest rate. Required reserves held at the central bank by financial institutions will earn zero interest. Any additional current account deposits would incur the minus 0.1 percent rate, the BOJ said.The rate will not apply to existing deposits. Existing current account balances will earn a 0.1% positive interest rate. Required reserves held at the central bank by financial institutions will earn zero interest. Any additional current account deposits would incur the minus 0.1 percent rate, the BOJ said.
But the bank added:But the bank added:
The BOJ will cut the interest rate further into negative territory if judged as necessary.The BOJ will cut the interest rate further into negative territory if judged as necessary.
Read the full statement here.Read the full statement here.
UpdatedUpdated
at 6.14am GMTat 6.14am GMT
5.42am GMT5.42am GMT
05:4205:42
Opening summaryOpening summary
Hello and welcome to the business live blog. It’s been a very eventful night in the world of finance with Japan making the surprise (to some, at least) decision to adopt negative interest rates.Hello and welcome to the business live blog. It’s been a very eventful night in the world of finance with Japan making the surprise (to some, at least) decision to adopt negative interest rates.
More on the detail of the decision very shortly but here’s a catch-up on what has happened:More on the detail of the decision very shortly but here’s a catch-up on what has happened:
Read our news story from our correspondent in Tokyo, Justin McCurry:Read our news story from our correspondent in Tokyo, Justin McCurry:
Related: Bank of Japan shocks markets by adopting negative interest ratesRelated: Bank of Japan shocks markets by adopting negative interest rates
UpdatedUpdated
at 5.51am GMTat 5.51am GMT