Talking Points
- There were no surprises for Yen investors from the Bank of Japan
- It left both interest rates and its bond-yield target alone once again
- Focus now shifts to BoJ Governor Haruhiko Kuroda’s press conference
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The Japanese Yen was steady against the US Dollar Friday as the Bank of Japan kept monetary policy on hold, as it was universally expected to do.
That meant that the Policy Balance Rate remains at minus 0.1%, with the ten-year Japanese government bond yield target still 0.0%.
The market will now look ahead to BoJ Governor Haruhiko Kuroda’s press conference at 0630 GMT. With annualized Japanese consumer-price inflation still well below the central bank’s 2% target, the BOJ is presumably a very long way away from ending its extraordinary monetary easing. The most-recent consumer price numbers, for April, showed an annualized rise of 0.4%.
However, the US Federal Reserve is already well advanced along the road toward more “normal” monetary settings as they were understood before the financial crisis. By contrast the BoJ’s balance sheet is now close to the size of Japan’s entire Gross Domestic Product as the result of stimulative bond buying. It topped JPY500 trillion (US$4.5 trillion) in June and there are growing calls for more public discussion of how this vast sum will eventually be wound down.
Markets will be anxious for any comment on this front which Mr. Kuroda may care to make, but concrete changes are clearly some way off, if they are coming at all. On Friday the BoJ said its bond purchases would continue at their JPY80 trillion annual pace.
On the broader economic front the BoJ increased its assessment of domestic private consumption and looked more hopefully to overseas demand levels.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
