Japan's Move to Ease is Form of Currency Intervention?

Geraldine Tan|News Assistant, CNBC Asia Pacific
Tuesday, 5 Oct 2010 | 4:29 AM ET

Japan's move to ease monetary policy on Tuesday is a form of currency intervention, said Michael Power, strategist at Investec Asset Management.

BOJ Eases Monetary Policy Further
The Bank of Japan eased monetary policy further -- cutting its overnight call rate target and creating a fund to buy JGBs and other assets. Michael Power, strategist at Investec Asset Mgmt, assesses the BoJ's decision, with CNBC's Yousef Gamal El-Din & Chloe Cho.

While the move was essentially to ease the supply of money, it does have the effect of weakening the yen, which Power said, is critical to maintain the country's current account surplus.

"Those who believe that quantitative easing isn't a form of currency intervention don't really understand the dynamics of what is going on," Power added.

The BOJ surprised market by cutting the overnight call rate to between zero to 0.1 percent, against the previous target of 0.1 percent. It also set up, as a temporary measure, a 5 trillion yen ($60 billion) fund to buy assets ranging from government bonds and short-term government securities to commercial paper and corporate bonds; and will also accept another 30 trillion yen of those assets as collateral under a loan scheme.


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