Bank of Japan keeps policy unchanged

Source: Dukascopy Bank SA
On September 22, the Bank of Japan published its Monetary Policy Statement. The four page statement essentially revealed that the future is highly unclear during Covid 19, asset purchases would remain unchanged, economic recovery would occur at a slower pace.

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.

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 with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of March 2022.

Statement on Monetary Policy

Statement on Monetary Policy

On the announcement, the USD/JPY reaction was flat. Namely, the rate did not increase volatility. On the other hand, volatility reduced, as the reaction was part of a slow five hour 27 base point move.

On a larger scale, the event was part of another bounce off from the support of the 109.20 level.

Initial Reaction

Larger scale situation

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