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BOJ's rate-heavy policy already looks hollow to some

TOKYO -- Financial market players suspect the Bank of Japan's new interest rate-focused policy may not provide the firepower it initially seemed to promise, handicapping attempts to stoke price growth through the appearance of a strong hand.

The market for overnight index swaps, which exchange unsecured overnight call rates for fixed interest rates for a certain period of time, gives a sense of how the rate the BOJ applies to certain deposits could change over the coming year. The implied average OIS rate for the next 12 months fell 0.005 percentage point to minus 0.202% Wednesday, compared to the bank's minus 0.1% policy rate. As many market players expect the BOJ to cut its deposit rate in 0.1-point increments, the swap market signals expectations for just one cut over the next year.

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