Interest rates unchanged in Japan, China's 7-day repo rate jumps

The Bank of Japan left interest rates unchanged today. Bloomberg reports:

The Bank of Japan held interest rates near zero and said it remains committed to fighting deflation as gains in the yen risk stunting the recovery from the country’s worst postwar recession.

Governor Masaaki Shirakawa and his colleagues kept the benchmark overnight lending rate at 0.1 percent by a unanimous vote, the central bank said in a statement today in Tokyo. All 17 economists surveyed by Bloomberg News predicted the decision.

While the BoJ is likely to maintain its easy monetary policy over the coming months, policy in China is expected to tighten. From Channel NewsAsia:

An interest rate hike is now expected as early as the second quarter, as regulators clamp down on aggressive lending. There is speculation in China that the government will officially change its fiscal and monetary policy stance at the party congress in March.

According to DBS, it is expecting to see a series of three hikes this year - for a total move of 27 basis points...

Market watchers are now pricing in a 3 to 5 per cent appreciation of the currency, starting as early as March or April.

Meanwhile, the yield on China's one-year bills were unchanged today but the seven-day repo rate jumped. From Bloomberg:

The cost of borrowing money in China’s interbank market jumped the most in a month after a report said some of the nation’s lenders will have to set aside more money as reserves from today.

The seven-day repurchase rate, which gauges the supply of funds in the market, climbed 30 basis points to 1.64 percent as of 1:15 p.m. in Shanghai, poised for its biggest increase since Dec. 25. It earlier touched this year’s high of 1.7 percent.