Japan Slashes Rates, Yen Grows

The yen advanced against all other major currencies today after the Bank of Japan announced a rate cut to a near-zero level and the investors ran from the risky assets into the Japanese and U.S. currencies.
The Bank of Japan reduced the target overnight rate from 0.3 percent to 0.1 percent at its meeting on December 19 and said that it will use the additional liquidity to help the domestic companies with their debt.
The recent rate cuts by the Federal Reserve and BoJ are the signals that the markets are more than troubled. Central banks show that they are fighting with the crisis and the crisis is in the state which requires such measures. Investors in their turn decode this message as the signal to continue converting to «safe haven» assets. Result — the yen and the dollar are likely to continue appreciating.
Analysts focus the market participants’ attention on the central banks’ pledges to buy out the corporate debts instead of the lower interest rates. The target rates in both U.S. and Japan are extremely close to zero and they won’t go negative. The next tool left to regulate the markets is the direct help to the financial institutions and the nation’s industrial leaders.
USD/JPY fell from 89.55 to 88.67 as of 9:16 GMT today. EUR/JPY went down from 127.79 to 124.80, while GBP/JPY declined from 134.65 to 133.14 and reached its lowest level since May 1995 at 132.53 today.

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