Yen lifts up as BoJ maintains status quo; shares, oil witness decline
The Bank of Japan maintained a status quo on its key lending policy rate at its monetary policy meeting on Thursday, pushing the yen beyond 105, a level that was last seen in September 2014. Also, Asian stocks slipped following the policy decision while global crude oil prices also decelerated. However, safe haven assets such as gold and sovereign bonds trended higher.
The central bank of Japan kept policy rate on hold despite sluggish global growth and timid inflation while waiting for the outcome of UK's referendum on June 23. However, policymakers remain under constant pressure to break the shackles of stagnation in the economy, pushing the yen higher.
The BoJ left the -0.1 percent interest rate unchanged amid maintaining its massive asset buying program at the two-day rate review that ended on Thursday, pledging to increase base money at an annual pace of 80 trillion yen (USD753 billion). The decision to maintain the base money target was taken by a majority 8-1 vote, while to stay pat was recognized by 7-2 vote.
The Japanese yen surpassed the 105 level last seen in September 2014 and the Tokyo Price Index (TOPIX) slid to four-month low. The MSCI Asia Pacific excluding Japan dropped to its lowest in three weeks as US crude slipped below USD48 a barrel. Gold climbed for a seventh straight day and Australia’s 10-year bond yield fell to a record. The greenback extended Wednesday’s slide after the number of Federal Reserve officials who see just a single rate hike this year rose to six, from one in March.
BoJ’s policy decision came in immediately after Wednesday’s FOMC meet that also maintained a status quo amid global economic and financial turmoil as the UK referendum on British membership in the EU nears.
Odds of the Fed raising key borrowing costs this year are now below 50 percent, with Chair Janet Yellen saying that the UK's June 23 referendum was a factor in the central bank’s decision to hold rates steady, Bloomberg reported.
Going into a fourth year of Kuroda’s record stimulus, BOJ’s balance sheet swelled to 81 percent of the nation’s GDP at the end of March, far larger than 25 percent for the US Federal Reserve and 28 percent for the European Central Bank, according to a BOJ report on June 3, according to a Bank of Japan report on June 3.
At 5:34GMT, USD/JPY traded 1.65 percent lower at 104.26. Japan’s Nikkei 225 traded 2.95 percent down at 15,449.50 while TOPIX 500 Index witnessed 2.91 percent decline at 961.52 on the Tokyo Stock Exchange.