The kiwi fell to a three-week low of 73.10 yen and was at 73.33 yen at 5pm in Wellington, from 74.45 yen late yesterday, after the Bank of Japan kept its policy rate at -0.1 percent while nearly doubling its target for purchases of exchange-traded funds.
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At the two-day rate review that ended on Friday, the BOJ made a decision to increase ETF purchases so its total holdings increase at an annual pace of 6 trillion yen ($58bn), up from the current 3.3 trillion yen.
Other stock markets in the region were also down while futures trading indicated the FTSE100 and Dow Jones would open slightly down on Friday morning. The Japanese yen surged over 200 points on the news and is trading at 103 against the U.S. dollar, which will likely upset the economic situation worse.
The central bank also held at 0.1 per cent the interest it charges to a portion of excess reserves financial institutions leave with the central bank, while saying it would thoroughly assess the effects of negative interest rates and its asset buying program.
Japanese government bonds sold off during the session, with the yield on the benchmark 10-year bond moving to -0.169% from -0.276 earlier. Now, the government’s fiscal stimulus must do the “heavy lifting” to revive the economy, he said.
At the same time, the BoJ kept interest rates unchanged at -0.1% on Friday but said it will increase purchases of exchange-traded funds.
The bank offered an increase in its purchases of exchange-traded funds (ETF).
The BoJ announcement came days after the government in Tokyo launched a fresh programme worth 28 trillion yen to kickstart the Japanese economy.
Finally, the central bank said in its policy statement that combining monetary and fiscal stimulus measures could create “synergy effects”. The central bank said it would purchase about 56.7 billion US dollars worth of exchange-traded funds per year, up from a previous 31 billion dollars.
Brent and West Texas Intermediate each lost 0.3 per cent and were headed towards the US$40 mark, well down from the 2016 peaks above US$50 at the start of June as the crucial USA holiday driving season comes to an end and temporary disruptions to output in Canada and Nigeria ease.
Unemployment fell to 3.1 percent in June from 3.2 percent for the past several months.
“The situation didn’t allow Kuroda to do nothing, but it seems Kuroda chose the ETF option reluctantly”, said Maiko Noguchi, senior economist at Daiwa Securities.
“With underlying inflation set to moderate further toward the end of the year, we think that the bank will still have to provide more easing before too long”, Marcel Thieliant of Capital Economics said in a commentary.
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South Korea’s Kospi lost 0.24% to close at 2,106.19, while Hong Kong’s Hang Seng Index slipped 1.28% to 21,891.37.
