To be honest, the policy decision today isn't all too surprising but after being caught off guard in December, there were some quarters of the market hoping for "something". That didn't materialise and we are seeing the Japanese yen get punished for it while bond yields are also sent falling across the board.
10-year Japanese bond yields are down from around 0.49% earlier to just under 0.43% at the moment:
USD/JPY has seen a jump after the initial whipsaw from around 133.50 to 134.90 at the moment, as buyers start to knock on the door of the 135.00 mark once again.
The figure level held the advance from last week and will be one to watch ahead of the weekly close today. A break above that will likely allow for further breathing room in USD/JPY towards the 200-day moving average, seen at 136.96 at the moment.
Going back to the BOJ policy decision, they left policy unchanged but there were plenty of small details to scrutinise. Let's take a look.
- BOJ forecasts higher inflation, with it hitting 2.0% in FY 2024 but sees it dropping to 1.6% in FY 2025
- Adds that the risk outlook for prices are to the downside for FY 2025
- BOJ removes reference to the Covid-19 pandemic in the forward guidance
- BOJ also withdraws promise to keep interest rates at current or lower levels
- Says to conduct broad review of policy but could take one to one-and-a-half years
As you can see, there is a bit of a mix of things in there. However, the fact that Ueda & co. are to conduct a slow and arduous policy review means that we are not likely to see major changes play out just yet.
At most, there might be tweaks to the yield curve control - perhaps later this year - but don't expect any changes to interest rates any time soon.
