BOJ monetary policy wrap-up

Bank of Japan (BOJ) kept the monetary policy unchanged at today's announcement. BOJ is purchasing assets as per its qualitative and quantitative easing (QQE) at a pace of 80 trillion yen per year.

• Today's policy decision was not unanimous but was kept unchanged over 8-1 votes.

• Member Mr. Kiuchi voted against. He believes the previous purchase rate of 60-70 trillion yen was appropriate and inflation targeting of 2% within the timeframe of 2 years were appropriate. Recently BOJ dropped the timeline of target.

• BOJ will keep the purchase in line with previous guidance and will keep the average maturity at 7-10 years.

• Annual pace of purchase of ETFs and REITs will be about ¥ 3 trillion and ¥ 90 billion respectively.

• There will be no changes regarding commercial paper and corporate bonds and their size will be maintained at current ¥ 2.2 trillion and ¥ 3.2 trillion respectively.

• BOJ raised concerns over inflation but expects the current program is enough to reach the price target of 2% inflation and reiterates to keep the easing as long as necessary to reach the target.

BOJ press conference -

• President Haruhiko Kuroda, reiterated his confidence on the program to reach the inflation goal; however discussed the possibility of downtick in inflation in the short run.
  
  
• Mr. Kuroda, shrugged off any fear of overheating as Nikkei reached highest in 15 years and also any liquidity issue in the govt. bond market.
  
  
• He recognized the growth in real wages if the effect of tax hike is excluded.

Impact -

• Yen currently trading at 121.3 broke into new intra-day low as expectation of further easing gets diminished.
  
  
• However bulls may not find momentum for any substantial gain as FOMC looms large ahead in the week.