The Japanese yen fell against all of its major rivals today. While domestic macroeconomic data was certainly unhelpful, the biggest reason for the drop was the uneventful Bank of Japan policy meeting.
The BoJ left its monetary policy largely unchanged, keeping the main interest rate at -0.1%. The central bank introduced forward guidance for policy rates, saying:
The Bank intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, taking into account uncertainties regarding economic activity and prices including the effects of the consumption tax hike scheduled to take place in October 2019.
The bank also kept the size of its asset purchase unchanged and the target for 10-year government bond yields at 0%, though allowed more flexibility for yields to move either above or below the target:
The yields may move upward and downward to some extent mainly depending on developments in economic activity and prices.
In case of a rapid increase in the yields, the Bank will purchase JGBs promptly and appropriately.
The BoJ said in regards to consumer inflation that “it is likely to take more time than expected to achieve the price stability target of 2 percent,” though also stated that inflation “is likely to increase gradually toward 2 percent with the output gap remaining positive.”
As for macroeconomic releases in Japan, there were plenty of them today, and all of them were markedly worse than market expectations.
USD/JPY jumped from the open of 111.06 to 111.53 as of 11:03 GMT today, bouncing from the daily low of 110.75. EUR/JPY advanced from 129.94 to 130.89. GBP/JPY gained from 145.81 to 146.81 after falling to the session low of 145.36 earlier.
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