As expected, the Bank of Japan (BOJ) refrained from making monetary policy changes in June after it raised its interest rates in March.
In a unanimous vote, the target range for its key short-term interest rates remains at 0.0% – 0.10%.
What the markets didn’t expect was for the central bank to delay any changes to its bond-buying practices. While members voted 8-1 agreeing to trim their bond purchases, they also won’t drop the deets on their bond-buying reduction plans until their next meeting in July.
The statement detailed,
“It will collect views from market participants and, at the next MPM, will decide on a detailed plan for the reduction of its purchase amount during the next one to two years or so.”
Link to the “Bond Market Group” Meeting agenda
On the economy, BOJ noted that “The employment and income situation has improved moderately,” so much so that “inflation expectations have risen moderately.” However, BOJ maintained that inflation in the second half of the year remains “likely to be at a level that is generally consistent with the price stability target.”
On the yen, the central bank shared that “there remain high uncertainties” surrounding Japan’s economic outlook so it’s “necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan’s economic activity and prices.”
Market Reactions
Japanese Yen vs. Major Currencies: 5-min
Overlay of JPY vs. Major Currencies Chart by TradingView
The Japanese yen started the trading day weaker against its major counterparts after seeing downswings during the U.S. session. Profit-taking may have also limited the demand for the yen.
The safe haven popped higher minutes before the central bank dropped its statement, but also fell sharply as soon as traders noted the delay in bond-buying reduction plans.
JPY is trading lower across the board ahead of BOJ Governor Kazuo Ueda’s presser scheduled later today.