The dollar fell more than a full yen on Friday at one point to as low as 102.825 and the Nikkei average tumbled almost 2pc, after the BOJ’s decision fell short of expectations.
Advertisement
Abe’s promise of a hefty fiscal stimulus package on Wednesday had effectively forced the central bank to come up with matching monetary ammunition, taking stimulus expectations to sky-high levels.
“Japan’s economy may see the pace of recovery slow for a while due to some weakness in exports and output”, Kuroda said.
JAPAN IN FOCUS: Investors are now hoping for new stimulus efforts from the Bank of Japan, which is expected to vote Friday on expanding monetary policy measures aimed at reviving sputtering growth in Asia’s second-biggest economy.
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.
“I don’t think we’ve reached the limits both in terms of the possibility of more rate cuts and increased asset purchases”, Kuroda told reporters after the policy meeting.
WALL STREET: Stocks had another day of meager gains on Thursday as investors worked through a new batch of mixed company earnings, including results from Facebook, Ford and Whole Foods and looked ahead to a meeting of the Bank of Japan.
Prime Minister Shinzo Abe said his government would compile a stimulus package of more than $265 billion next week to reflate the flagging economy, although it was unclear how much would be spent to directly boost growth.
The 7-2 central bank decision was to nearly double annual purchases of exchange traded funds, to 6 trillion yen ($57 billion) from the current 3.3 trillion yen. This is targeted to increase by $24 billion, around Y2.5 trillion, and double the previous size of $12 billion, under this lending program, the BOJ provides its U.S. dollar funds for a period of up to four years, to support Japanese firms’ overseas activities through financial institutions.
The surge in the Japanese yen triggered a rise in currencies across the region.
The yield on 10-year Japanese government bonds rose initially, to -0.18 per cent, while the Yen rose to ¥102.90 per U.S. dollar, ending the day up 1.8 per cent at ¥103.37. It also left untouched the minus 0.1 percent rate for a portion of commercial banks’ reserves.
Still, while industrial output fell 1.9 percent from the year before, it rose 1.9 percent from the month before, with strong shipments related to homebuilding and other construction.
Advertisement
“The fact that the Bank of Japan eased policy is acknowledged, but it was just ETF buying, and the overall impression was that it was not enough and investors were disappointed”, Takuya Takahashi, a strategist at Daiwa Securities, said. “Increased ETF purchases will help with cross share unwinding and support the market”.
