BOJ monetary policy review

Bank of Japan (BOJ) kept monetary policy steady in today's meeting, which was no major surprise for many but many economists expected to BOJ to increase its asset purchase pace. Yen gained some grounds after the announcement.

Bank of Japan (BOJ) kept policy rates on hold at 0.10% and maintained the pledge to increase monetary base by ¥ 80 trillion per annum.

BOJ might surprise markets with additional easing this year or even this month, according to some analyst. Goldman Sachs has called for additional stimulus in October. Another policy meeting is scheduled for October 30^th.

Key highlights -

• As per BOJ, Japanese economy is recovering moderately. However its exports and production have taken hit over slowdown in emerging markets. But it notes that overseas economies are doing well in spite of slowdown across EM economies.
  
• It notes that household investment picking up in the economy and private consumption resilient and financial conditions are accommodative.
  
  
• BOJ notes that despite headline inflation at zero percent, inflation from longer term perspective is rising. It can clearly be inferred that BOJ is likely to hold policy steady at current level for some time. Focus remains on 'moderately' growth and comments on inflation. BOJ blames energy prices behind lowflation.
  
  
• BOJ member Mr. T. Kiuchi once again voted against current policy and voiced in reduction of asset purchase to ¥ 45 trillion.
  
  
• According to BOJ, risks lies in slowdown in emerging and commodity exporting economies as well as pace of economic recovery in Europe and US.

Today's statement indicates that policy is likely to remain same until some further adverse conditions demand else.

BOJ might want to wait for the FED hike before further move. Next sales tax hike could prove crucial for further expansion.

Yen is currently trading at 120 against Dollar. Focus for Yen is now Dollar's broad move and level of risk aversion in the market.