In a welcome surprise for enterprises, the Bank of Japan on Tuesday announced an unexpected set of measures for further monetary relaxation. Adopting a de facto zero interest rate policy, the BOJ will guide its key short-term interest rate to a range of zero to 0.1 percent, from the previous 0.1 percent.
The central bank also decided to create a ¥5 trillion fund to buy long-term government bonds and debentures, including some risk assets, to inject liquidity into the economy. It had earlier introduced a ¥30 trillion fund-supply operation.
The BOJ indicated that the de facto zero interest rate policy will continue until it judges that "price stability is in sight." It defined price stability as the stabilization of the consumer price index in a positive range up to a 2 percent increase. This is close to setting an inflation target as demanded by some politicians.