Bank of Japan Policy Unchanged Disappoints Markets

Bank of Japan Governor Haruhiko Kuroda said the central bank will consider fresh steps to calm markets if borrowing costs spike again in the future, but the central bank held off on new measures on Tuesday arguing that bond markets had stabilized.

The decision disappointed some investors, who had factored in new market operation measures, prompting a rebound in the yen and falls in Tokyo shares and Japanese government bonds – moves that counter the aims of Prime Minister Shinzo Abe’s aggressive policy mix.

Rising bond market yields have already pushed up some mortgage rates, raising concerns that a further rise could increase other borrowing costs and so dent the economy’s new found momentum under Abe.

“We remain vigilant to long-term interest rate moves. It’s undesirable for volatility to heighten, so we’ll make efforts to reduce it,” Kuroda told a news conference.

The BOJ left monetary policy unchanged, as widely expected, thus keeping in place a pledge first made on April 4 to expand the supply of money at an annual pace of 60 trillion ($605 billion) to 70 trillion yen in a bid to turnover years of deflation with 2 percent inflation in two years.

The BOJ raised its official assessment of the economy – another reason that could explain its inaction on market-calming measures. Data on Monday had shown economic growth was faster than previously thought, the current account surplus was growing rapidly and lending was on the rise.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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