Bank of Japan again signals readiness to ease further

The Bank of Japan’s decision to extend and expand the special loan facilities that were due to expire next month is a largely symbolic move that will not have a significant impact on financial conditions. Nor should it have surprised the markets as much as it appears to have done. Nonetheless, the decision underlines the Bank’s willingness to ease monetary policy further if necessary to support the recovery. It is also consistent with our forecasts of fresh yen weakness and Nikkei strength.