Japan moves the markets by cutting rates even closer to 0%

The news driving stocks this morning comes from Japan where, overnight, the Bank of Japan announced that it would pursue a “virtually zero” interest rate policy and implement its own version of quantitative easing by setting up a five trillion yen fund to buy government bonds and other debt. The bank set its overnight call rate at 0% to 0.1%, the lowest since 2006.

Resumption of yen’s gains may force Japan to intervene again rather than admit failure

After an initial drop to a one-month low on September 15, the yen is now up 1% since the government intervened in order to drive down its price. The Japanese government put off intervening in the currency markets for so long that traders believe it now has no choice but to attempt again to weaken the yen. Abandoning intervention now would brand the policy a failure and remove any restraint on traders.