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Portfolio > Asset Managers

Japan Keeps Rates Near Zero, Details Asset-Purchase Plan

By Marlene Y. Satter

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The Bank of Japan held off on further action on monetary easing on Thursday, instead keeping interest rates close to zero and announcing the details of its previously announced plan to buy up assets.

The asset purchase plan, announced Oct. 5, would entail the purchase of $18.36 billion (1.5 trillion yen) in long-term government bonds as well as $24.68 billion in short-term government securities, Reuters reported. When the plan was originally unveiled, the central bank had pledged a sum of $61.67 billion to bolster the economy by buying assets. The plan includes not only long- and short-term government assets but also commercial paper and corporate bonds.

The bank also moved up the next policy board meeting, originally scheduled for Nov. 15-16, to Nov. 4-5, so that it could arrange the purchase of exchange-traded funds and J-REITs.

The vote to keep interest rates unchanged at a range of zero to 0.1% was unanimous; the yen had little reaction to the announcement.

Japanese fund managers, however, raised equity ratings to 46.6%, their highest levels in 10 months, anticipating substantial liquidity from both Japan and the U.S.’s anticipated currency easing actions. Reuters reported that managers also cut bond exposures to 46.8%, the lowest levels since last December, based on the low interest rates globally.

Good performance by U.S. stocks after the elections on Nov. 2 is anticipated, with Kenichi Kubo, a senior fund manager at Tokio Marine Asset Management, quoted as saying, “We need to watch U.S. President Obama's policy closely.”

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