The kiwi fell to a three-week low of 73.10 yen and was at 73.33 yen at 5pm in Wellington, from 74.45 yen late yesterday, after the Bank of Japan kept its policy rate at -0.1 percent while nearly doubling its target for purchases of exchange-traded funds.
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Such concerns may be addressed when the BOJ conducts an assessment of the effect of its current policies at its next rate review on September 20-21, though Kuroda ruled out the chance of modifying the price target or the timeframe for hitting it.
“With so many cross currents at play over the short-term, we would rather watch the action in gold from the sidelines for the time being, at least until Friday’s news from both the USA and Japan is out of the way”, INTL FCStone analyst Edward Meir said in a note ahead of the BoJ statement.
The BOJ also doubled the size of a US dollar lending program to support Japanese companies’ operations overseas, to $24 billion. “However, the Bank of Japan has underwhelmed with just a doubling of its of ETF buying program. but no increase in its bond buying program or monetary base target, suggesting no real further easing of monetary policy”, said Shane Oliver, head of investment strategy and chief economist of AMP Capital.
The bank will increase the purchases of exchange-traded funds so that their outstanding amount will rise at an annual pace of about JPY 6 trillion.
“The BOJ has reached a point where it may have to lower JGB purchases soon, so additional easing may not have a great impact”.
“Japan is conducting a powerful mix of flexible fiscal policy and quantitative easing”.
The Japanese government unveiled a surprisingly large 28 trillion yen ($267.58 billion) stimulus package on Wednesday but sources told Reuters on Thursday that the government package contains direct fiscal spending of only 7 trillion yen, also likely to disappoint investors.
The Yomiuri ShimbunThe Bank of Japan’s latest move is apparently an aim to stress its commitment to pulling the nation out of deflation in tandem with the government’s economic measures.
The BOJ appears to have found it hard to recognize the need to significantly expand its easing policy at this time. “In addition to that, there seems to have been political pressure”, said Tsuyoshi Ueno, senior economist at NLI Research Institute. The actions increased speculation that the bank had acted on political pressure rather than conviction over the stimulus programme. Uncertainty over the path of interest rates has held gold in check since it rallied to more than two-year highs in the wake of Britain’s shock vote last month to leave the European Union.
Some analysts said the review could lead to more radical steps being proposed.
Shares in Japan have opened flat in Friday’s session, with investors remaining cautious, as the country’s central bank is at the tail end of its two-day meeting to discuss monetary policy.
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“We can continue to expect elevated volatility and possible short-term risk of yen strength back towards possibly 100”, How added.
