The Bank of Japan (BOJ) on Friday kept monetary settings unchanged, but revamped its guidance on the future path of policy, and decided to conduct a “broad-perspective” review of its monetary policy.
As widely expected, the BOJ kept intact its short-term interest rate target at -0.1 per cent and that for the 10-year bond yield around 0 per cent at the two-day meeting that ended on Friday.
Market reaction:
The yen fell about 0.6 per cent to a one-week low of 134.87 per dollar, while Japanese government bonds rallied.
Japan’s Nikkei share average rose more than 1 per cent to reach a new intraday high at 28,786.07, after the BOJ left its ultra-easy monetary policy settings unchanged.
Here are some analysts’ views on the decision:
Saxo Markets (Singapore) Market Strategist Charu Chanana
“The wait for the announcement sparked quite a bit of volatility in the yen and rising expectations that we will get a tweak. But eventually, even their (BOJ) announcement of a policy review came with a 1-1.5-year timespan, which was longer than what market expected (tweaks by July) even as inflation forecasts were raised across the board. Looks like Japanese yen would go back to being a Treasury yield story for now.”
OCBC (Singapore) Currency Strategist Christopher Wong
“The policy review is in line with our expectations for policy assessment. We still look for a removal of YCC regime, interest rate hike at some stage this year amid broadening inflationary pressures (Tokyo core CPI rose to another record high) and upward pressure on wage growth in Japan.”
Daiwa Institute Of Research (Tokyo) Economist Shotaro Kugo
“No big surprise – the forward guidance tweak and announcement of a “review” had been reported beforehand. Interestingly, Ueda appears to have relied on media reports ahead of the policy meeting, as we saw relatively more pre-reports this time. Maybe that’s his way of communication to avoid surprises and gradually promulgate the policy changes to the market.”
Bank Of Singapore Currency Strategist Moh Siong Sim
“It does look a bit dovish, given that the market was not expecting any change, but perhaps held on to hopes that some tweaking of the policy setting, especially the YCC, may happen down the road.
“BOJ did upgrade the inflation forecasts, but at the same time, I think the hopes of a policy change has been somewhat dampened by the review, which is expected to last one to one-and-a-half years … That might have dampened hopes of an imminent move in the policy setting.”
