The yield on three-year Treasurys fell 0.6 basis point to 1.450 percent, and the return on the benchmark five-year government bond shed 0.7 basis point to 1.552 percent.
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At a two-day rate review ending on Thursday, the BOJ chose to maintain its pledge to increase base money at an annual pace of 80 trillion yen ($960 billion) by a 8-1 vote. “The stance of monetary policy remains accommodative, thereby supporting further improvement in labour market conditions and a return to 2 per cent inflation”, Fed said in its review. “I thought the BOJ would ease further today to accelerate the yen trend which had been weakening on expectations for further easing”, said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
Japan’s Nikkei Stock Average ended down 3.6% – the largest daily percentage loss since February 12.
International Monetary Fund slashed United States’ growth projection by 0.2 percentage point to 2.4 per cent in 2016 and forecast 2.5 per cent expansion in 2017, while EU’s growth was also lowered by 0.2 percentage point to 1.5 per cent in 2016 and Japan’s outlook was revised down by 0.5 percentage point to 0.5 per cent. It also left unchanged a 0.1 per cent negative rate it applies to some of the excess reserves that financial institutions park at the BOJ.
The New Zealand dollar fell to its lowest level in more than a week against the yen after the Bank of Japan surprised the market by not expanding its monetary stimulus, rounding out a day of volatility tied to central bank actions.
“Both foreign exchange and equity markets have given the Bank of Japan’s unchanged policy decision the thumbs down, with the yen rising as much as 2.0 percent against the U.S. dollar”, said Jeremy Cook, chief economist at foreign exchange group World First.
In addition to the BOJ’s decision to hold steady in the face of soft global demand and a sharp rise in the yen, the dollar was also hit by the Federal Reserve’s decision on Wednesday not to give a strong sign of another rise in rates in June.
Instead, the Bank of Japan chose to keep rates where they are.
The Japanese yen surged to 109.36 to the U.S. dollar following the announcement after trading earlier in the day above 111.87 yen.
WALL STREET: Major U.S. benchmarks had a mixed finish.
The Dow Jones Industrial Average suffered its biggest drop since February in a broad selloff Thursday.
The kiwi fell as low as 75.16 yen and was at 75.54 yen at 5pm in Wellington, down from 77.09 yen before the BOJ statement and from 76.37 yen late yesterday. The contract rose $1.29, or 2.9 percent, to settle at $45.33 a barrel on Wednesday, which was its highest price since December.
The yen, however, gained three per cent against the dollar.
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The euro was steady at $1.1325.
