Japanese Yen Gains, Nikkei Falls as BOJ Leaves Policy Unchanged

Talking Points:

• BOJ keeps monetary base growth target at ¥80T
• Yen gains, Nikkei drops as BOJ fuels risk aversion

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The Japanese Yen rose against the US Dollar while the Nikkei 225 benchmark stock index declined after the Bank of Japan maintained the target annual increase in the monetary base unchanged at ¥80 trillion, as expected. The central bank said it will continue QQE until stable 2 percent inflation is maintained.

Interestingly, the BOJ noted that some data shows weak developments in inflation expectations. Still, policymakers asserted that easing is exerting intended effects even as CPI is expected to be about 0 percent for the time being.

Earlier this week, Japan was shown to have slipped into a technical recession after GDP fell for a third consecutive quarter in the three months through September. With that in mind, the reaction in the Yen and Japanese share prices likely reflected risk aversion fueled by disappointment at the absence of stimulus expansion.