THE TAKEAWAY: Bank of Japan increased Asset Purchase Fund by 10 trillion yen > BoJ to discuss inflation target next meeting > USD/JPY little changed
The Japanese yen was little changed as the Bank of Japan increased their Asset Purchase Fund to 76 trillion yen, up from 66 trillion previously, while the Credit Loan program was left unchanged at 25 trillion yen bumping the total asset and credit facility program to 101 trillion yen. The key benchmark rate was left unchanged at 0.10%. Policy officials said they would increase Japanese government bond (JGB’s) purchases by 5 trillion yen and also increase purchases of treasury securities by 5 trillion.
The central bank said they would ‘examine’ the inflation target next meeting possibly implying that newly elected Prime Minister Abe may meet with BoJ officials to discuss his plans to get the Japanese economy to produce two percent inflation. Abe also said that he would like to bring down the value of the currency, boost export growth and put an end to deflation.
Forex traders likely responded with little selling effort on the yen as the Japanese currency has been aggressively sold leading up to Abe’s election victory. This round of asset purchase expansion offered little surprise to markets, but next month’s meeting may produce a substantial boost to FX volatility as Abe has a chance to influence the central bank to get more aggressive on their dovish monetary policy efforts.
USD/JPY, 1 Minute Chart
USD/JPY, Daily Chart
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