TOKYO (AP) – Japan’s central bank stunned financial markets Thursday with a decision not to splash out still more monetary stimulus for the ailing economy – apart from zero-interest loans for an earthquake zone.
Share prices tumbled after the Bank of Japan ended its policy meeting without stepping up asset purchases or cutting interest rates further into negative territory. The Nikkei 225 stock index gave up early gains to close down 3.6 percent. The Japanese yen surged by nearly 3 percent.
“The BOJ never fails to surprise us. It is probable that the central bank is temporarily running out of tools to stimulate the economy, or they need more time to observe and assess the impact of negative interest rates,” said Margaret Yang of CMC Markets.
But while markets were disappointed, analysts said the Bank of Japan could be biding its time out of both domestic and diplomatic considerations.
Japan is the host country for the Group of Seven wealthy nations’ summit, due to take place May 26-27. Stimulus that would help weaken the Japanese yen could irk some trading partners.