The Bank of Japan expanded purchases of exchange-traded funds to 6 trillion yen and doubled the size of a USA dollar lending program to $24bn, but left its policy rate unchanged and maintained its monetary base target at $80 trillion.
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“Our main scenario of widening negative rates didn’t eventuate, and the expansion of dollar funding is a positive for banks”, Kentaro Kogi, an analyst at Citigroup Inc.in Tokyo, said by phone.
“The BOJ clearly disappointed by merely expanding on its ETF purchases, leaving the annual pace of its monetary base increase and policy rate unchanged”, said Heng Koon How, senior FX investment strategist for Credit Suisse.
On Wednesday, the Japanese government unveiled a surprisingly large 28 trillion yen ($267.58 billion) stimulus package, firmly placing the stimulus ball in the central bank’s court.
“In the past, we have seen many instances where BoJ tried and did all it could, but still it was not able to produce the desired result”.
“We will of course consider what to do in terms of monetary policy steps, based on the outcome of the assessment”.
In currencies, the euro rose to $1.1073 from $1.1023, and the dollar was unchanged at 105.45 yen. “The BoJ won’t admit it, but it has reached the limits of quantitative easing (QE) and negative rates”.
The BOJ maintained its rosy inflation forecasts for fiscal 2017 and 2018 in a quarterly review of its projections. It also left intact its timeframe for hitting its 2 per cent price growth target, but warned that heightening uncertainties could cause delays.
British Airways-owner IAG posted a lower than expected quarterly operating profit and said it expected 2016 profit to rise by a “low double digit” percent after attacks, strikes and Britain’s vote to leave the European Union impacted travel demand and hit result. While it’s been a busy week for corporate earnings, and individual stocks have moved a lot, the overall market has been relatively quiet.
Japanese officials are under intense pressure to deliver as economists increasingly write off Prime Minister Shinzo Abe’s stuttering attempts to fire up the flagging economy.
Before the BOJ’s decision, many investors warned of a big chance of disappointment because markets have long expected more stimulus, making it hard for BOJ Governor Haruhiko Kuroda to spring a surprise.
Anxious about their dwindling policy options, some BOJ policymakers have expressed doubts over the feasibility of expanding an already massive stimulus programme that has failed to boost inflation. Some analysts say the review may lead to more radical steps being proposed. But the central bank did not match expectations.
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“This makes the next meeting very important”.
