Investment Clock insights

Bank of Japan eases policy

Trevor Greetham

29 January 2016

Market stress is again triggering policy ease by the world's largest central banks, in an echo of the events of autumn last year.

The Bank of Japan has surprised the market today by moving to a negative interest rate policy. Mario Draghi signalled that there would be further ease from the European Central Bank at the next meeting. Meanwhile, the January Federal Open Market Committee statement set the bar very high for a March rate hike in the US.

Concerns over growth in China helped to trigger a plunge in chronically over-supplied commodity markets.

A deflationary shock like this will always be met with monetary easing. With investor sentiment deeply oversold we have been buying equities and remain overweight Europe and Japan, the regions where policy is loosest.

Chart: Investment sentiment is depressed - a buy signal

The value of your investment and the income from it is not guaranteed and can fall as well as rise. This article is for professional customers only. The views expressed are the author’s own and do not constitute investment advice.