As BOJ intents to keep interest rate at extreme low, Long USD/JPY?
The Bank of Japan left its key interest rates unchanged while announcing its policy framework will now be more "flexible". This includes a revision in purchases of exchange-traded funds toward assets linked to the Tokyo Stock Price Index (TOPIX) and flexibility in bond operations.
The BOJ said its annual purchases of ETFs that track the TOPIX would rise to 4.2 trillion yen ($37.7 billion) from 2.7 trillion yen now.
BOJ mentioned that they are adopting forward guidance on policy rates and will maintain very low rate levels for an extended period of time, but long-term rates may move up or down to some extent depending on markets and the economy.
As Japan’s inflation is currently at 0.7%, far-off from BOJ’s target of 2%. As BOJ admitted themselves that it would take time for inflation to hit its target, they will therefore be maintaining their current loose monetary policy until inflation improves.
Fullerton Markets Research Team
Your Committed Trading Partner
