Bank of Japan: We cannot rule out further cuts - Danske

FXStreet (Córdoba) - According to analysts from Danske Bank today’s decision to introduce negative rates by the Bank of Japan could boost global risk but not for a long time. Further easing should not be ruled out.

Key Quotes:

“The Bank of Japan (BoJ) this morning introduced negative rates with a three tier system by the lowest possible majority; the QQE programme was left unchanged.”

“We stress that the signalling value that the BoJ is not done easing is more important than the actual rate cut which is marginal; we cannot rule out further cuts into negative terrain but the market is already pricing this in to some extent.”

“In our view, the signalling effect is more important than the actual interest rate cut. The small rate cut in itself will not have a material impact on the Japanese economy –especially since the pass-through will be limited by the adoption of a ‘three-tier system’. Rather, the signal that the BoJ is not done easing will have a greater effect on expectations and sentiment, which should support an improvement in the outlook for inflation in Japan.”

“ We expect the decision to boost global risk sentiment in the coming days but crucially we do not see this as a trigger of a prolonged global risk rally.”