The Bank of Japan unveiled a negative interest rate policy two weeks ago because it concluded that more forceful action was needed to lift inflation. Now, with equities slumping and the yen soaring to a 15-month high, policymakers are under even greater pressure. What’s more, their new policy tool has been tarnished. We suspect that they will respond by stepping up the pace of asset purchases again, probably next month, while also further lowering the interest paid on bank reserves.
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