Last week, the Bank of Japan left monetary policy unchanged and introduced a zero target level for the yield of 10-year government bonds, which surprised financial markets. This incentive measure has not been used for several decades. The Bank also adopted target inflation level above 2%, although even the level of 2% has never been reached.
The Bank of Japan kept interest rate unchanged at -0.1 percent and has stated that quantitative easing program will be continued until inflation exceeds 2%. It is unlikely that the measures will accelerate inflation or improve financial conditions.
Today’ speech by Bank of Japan Governor Haruhiko Kuroda supported new monetary policy. At the same time, he also said that now the Central Bank is aimed at inflation incentives for which the Bank has elaborated new tools.
Tomorrow at 02:50 (GMT+3) a meeting of the monetary policy Committee of the Bank of Japan will be held. The Committee will analyze economic situation in Japan and provide guidance for future financial policy of the Bank of Japan. If there will be indications of further policy easing in the country, it will support Japanese stock market and weaken the Yen.
With the opening of today's trading session, the Yen is growing in the currency market, while the pair USD/JPY is declining. In the European session decline in the pair accelerated.
Kuroda has said today that the Bank is ready to use all possible instruments in order to achieve its goals. Mr Kuroda also stressed that the purchase of government debt by the Bank of Japan might not reach 80 trillion yen per year.
Some market participants believe that the Bank of Japan may suspend program monetary easing policy, which is a warning signal to buyers of Japanese assets and sellers of the Yen.