Japan’s Nikkei share index rose after the announcement, while the yen weakened to about 102.5 yen against the dollar.
Advertisement
Yields on those maturities have hit six-month highs earlier this month as investors bet the BOJ would modify its stimulus to allow the yield curve to steepen to mitigate damages of negative interest rates on financial institutions.
Traders will now focus on the US Federal Reserve’s next policy decision, to be announced early on Thursday morning, Australian time.
The Bank of Japan’s monetary policy reboot on Wednesday was met with a rising dollar, tepid Asian stock markets and a broad uptick in bond yields, indicating investors struggled for clarity on what the changes mean for global risk appetite.
BOJ scraps monetary base, targets longterm rates * Fed seen standing pat, could hint at hike this year * Sterling extends losses on concerns about Brexit impact TOKYO, Sept 21 (Reuters) – The yen weakened against the dollar and euro on Wednesday after the Bank of Japan altered its policy framework, and investors bought back the US currency ahead of the outcome of the Federal Reserve’s policy meeting later in the session.
It will continue to buy assets such as government bonds, at the rate of 80tn yen ($787bn; £605bn) a year.
After a two-day meeting, BoJ policymakers set a target to raise government bond yields as part of their drive to kickstart inflation.
Japan’s central bank announced Wednesday that it would keep its key interest rate steady at -0.1%.
“With regard to the outlook, sluggishness is expected to remain in exports and production for some time, and the pace of economic recovery is likely to remain slow”, it said. It said it would buy 10-year JGBs so that the yield would hover around zero percent, Reuters reported.
The decisions were carried with a 7-2 vote with the BoJ board leaving open the option for further rate cuts if needed.
We should hear more from Japanese central bank chief Haruhiko Kuroda shortly.
“It has been said that it’s hard for central banks to control long-term rates”.
Volatility was especially acute in the currency markets with the Japanese yen weakening by as much as 1.2 per cent against the USA dollar in choppy trade. Japan’s vehicle exports fell 9.4 percent while exports of machinery, chemicals and electronic devices also dropped.
Advertisement
The benchmark Nikkei average ended up 1.9 percent, its biggest one-day percentage rise since August 29, at 16,807.62 points.
