On Tuesday October 5, 2010, the Bank of Japan (central bank) cut its overnight rate target to a range between 0 and 0.1% (effectively 0%), from 0.1%. This reinstates the “zero-interest rate policy” that was ended in July 2006 by the BoJ.
It intends to buy 5 trillion yen, or roughly $60 billion USD worth of assets from government bonds, short-term government securities, commercial paper, and corporate bonds. The BoJ carried out these monetary easing policies to stimulate the economy and to lower the value of the Japanese yen.
Earlier (9/15/2010) Japan’s Prime Minister Naoto Kan and BoJ intervened to sell yen in the market for the first time in six years in an attempt to stop the currency’s rise from hurting exporters and threatening a fragile economic recovery. Dealers suggested the amount to be about 300-500 billion yen, or roughly $3.6-$6 billion USD. The economy has been in and out of deflation for about 15 years, and the core consumer prices have continued to decline from 2009 levels.