Bank of Japan joins 'zero interest' race


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The Bank of Japan today joined the big economies' race to zero interest rates, cutting the official shortterm interest rate to just 0.1 per cent from 0.3 per cent.

Central bankers in Tokyo had their hand forced by the US move to near-zero rates this week.

The cut formed part of a two-pronged attack from Japanese authorities today, as the government announced plans to buy nearly £150billion of shares held by banks in order to prop up the stock market and boost banks' capital.

bank of japan

Race to the bottom: Japan lowered interest rates to 0.1 per cent

The government's sharebuying-plan is part of a stimulus package worth 75 trillion yen (£556billion) that also includes 10 trillion of capital injections into banks, the Cabinet Office said.

It hopes the move will stop banks selling their holdings in the market. The plan must be approved by parliament.

The country's biggest bank, mitsubishi UFJ, rose 4.1 per cent by the lunch break in Tokyo on news of the plan.

The Topix Banks Index, tracking 84 lenders, was up by 1.8 per cent.

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