Definition: The Overnight Call Rate Target determines the interest rate banks will pay on the Japanese overnight market. It is the most important interest rate in Japan.
Description: This is the average interest rate the Bank of Japan is looking to see on short-term deposits. The Bank of Japan's board of governors decides what The Overnight Call Rate Target should be, then uses open market operations to hit this target.
Influence: High interest rates lead to a decrease in lending and trigger an increase in consumer savings, causing a slowdown in economic growth. A rise in the Overnight Call Rate Target usually leads to an increase in capital flowing into Japan and provides a boost for the yen in the medium term. However, if the increase in rates is not accompanied by rapid economic growth, this may lead to economic stagnation and have a negative impact on the yen in the long run.
Market Impact: High
Released: Released once a month (twice in certain instances)
Source: The Bank of Japan