Bank of Japan continues monetary easing

Source: Dukascopy Bank SA
On April 28, the Bank of Japan released its Outlook Report and Monetary Policy Statement. In general, the bank is set to continue its monetary easing policy, which is weakening the value of the Yen.

Namely, the bank is keeping its bank rates at previous levels and 10-year Japanese government bond yield target is set to be the same. Meanwhile, the inflation forecast for 2022 has been raised from 1.1% up to 1.9%.

Quoting the statement: "The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank. The Bank will purchase a necessary amount of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around zero percent

In order to implement the above guideline for market operations, the Bank will offer to purchase 10-year JGBs at 0.25 percent every business day through fixed-rate purchase operations, unless it is highly likely that no bids will be submitted.

The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding. The Bank will purchase CP and corporate bonds at about the same pace as prior to the novel coronavirus (COVID-19) pandemic, so that their amounts outstanding will gradually return to pre-pandemic levels, namely, about 2 trillion yen for CP and about 3 trillion yen for corporate bonds."

Released Document

Statement on Monetary Policy

The news caused a surge of the USD/JPY by 125 base points or almost one percent in the fifteen minutes after the release. Moreover, the surge continued, as afterwards the pair even managed to reach above the 130.00 mark.

On a larger scale, the USD/JPY was surging since the start of 2021. However, at the start of March, as the United States started monetary tightening, the rate has jumped from 115.00 up to the 130.00 level.

Initial Reaction

Larger scale situation

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