Instead the bank sanctioned an increase in purchases of exchange-traded funds as it attempted to accelerate inflation towards its 2 per cent target.
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Meanwhile, Paul Tasi, director of research for Japan at Fidelity International, was more positive: “With no helicopter money announced, the BoJ’s move today was undramatic and can be viewed as slightly positive”.
The dollar briefly sank below 103 yen from 104.20 yen, while Tokyo’s Nikkei 225 index dived 1.7 percent immediately after the BoJ issued its statement after a two-day meeting.
The safe-haven Japanese yen climbed as high as 102.07 against the U.S. dollar after the announcement, from 104.5 yen before the announcement.
The central bank also held at 0.1 percent the interest itcharges to a portion of excess reserves that financial institutions leave with the central bank.
Pressure for BOJ action has intensified leading up to the rate review with Japan’s economy minister urging the bank to work with the government to spur growth in the wake of Prime Minister Shinzo Abe’s announcement of a bigger-than-expected 28 trillion yen stimulus package on Wednesday.
“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. With core CPI stagnant due largely to slumping energy prices, the central bank began internally calculating a new index that shows inflation exceeding government data. He aforesaid that the BOJ couldn’t do something on the negative rate as a result of it’s less-traveled.
“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 United States and Japan is out of the way”, INTL FCStone analyst Edward Meir said in a note ahead of the BoJ statement.
It’s going to be a very busy end to the trading week, with a large number of earnings and economic data releases scheduled throughout the day. Japan dodged a recession in the first three months of the year.
Before the decision, sources familiar with the BOJ’s thinking had said a sizeable increase in bond purchases, combined with an expansion of risky assets such as exchange-traded funds, would be the most likely option if the BOJ wanted to shock markets with a large-scale easing. “Increasing ETF purchases makes no contribution to achieving 2 percent inflation”.
The dollar has fallen since the Federal Reserve’s statement from its policy meeting on Wednesday disappointed some investors who had thought the USA central bank might signal that a rate increase was possible in September.
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Japan reported further signs of weakness in its economy in June, with industrial output and consumer spending falling.
