The Bank of Japan in its two-day monetary policy meeting that concluded on Friday, kept its key interest rate unchanged while increasing the purchases of Exchange-Traded Funds (ETFs). This came in contrast to market expectations for a rate cut coupled with a hefty pour of stimulus to aid the ailing economy.
Policymakers at the BoJ kept the main interest rate at -0.1 percent, unchanged since January. Economists had, however, expected a reduction to -0.2 percent.
The BoJ’s decision to increase its purchase of ETFs to 6 trillion yen from their previous pace of 3.3 trillion came by a majority 7-2 vote. Further, the central bank also agreed to increase the size of the Bank’s lending program to support growth in US-denominated currencies.
Bank of Japan Governor Kuroda at a press conference post the release of the monetary policy statement said that the economy is likely to expand moderately as a trend. He mentioned that today's policy steps and government fiscal stimulus will provide synergy effects to the economy.
Meanwhile, the BoJ's disappointing move saw USD/JPY drop from over 105.00 to as low as 102.71. The Nikkei actually rose marginally, even as the 10 year JGB yield jumped by 9 basis points to a 5-week high of -0.16 percent.
