As expected, the Bank of Japan (BOJ) refrained from making monetary policy changes in June after raising interest rates in March.
In a unanimous vote, the target range for key short-term interest rates remained at 0.0%-0.10%.
Link to the Bank of Japan's June statement
What markets did not expect was for the central bank to delay any changes to its bond purchasing practices. While members voted 8-1 to agree to reduce their bond purchases, they also will not forgive debt related to their plans to reduce bond purchases until their next meeting in July.
In detail, the statement
“It will collect views from market participants and, at the next MPM meeting, decide on a detailed plan to reduce the purchase amount over the next year or two or so.”
Link to the Bond Market Group meeting agenda.
Regarding the economy, the Bank of Japan noted that “The employment and income situation improved moderately,” To the extent that “Inflation expectations rose moderately.However, the Bank of Japan stressed that inflation in the second half of the year remains “It is likely to be at a level that is broadly consistent with the goal of price stability.“
Regarding the yen, the central bank said that “there are still significant uncertainties” surrounding Japan’s economic outlook, so it is “It is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices.“
Market reactions
Japanese Yen against major currencies: 5 minutes
Overlay of the Japanese Yen against the major currencies Chart by TradingView
The Japanese Yen started the trading day weaker against its major counterparts after seeing declines during the American session. Profit taking may also have limited demand for the yen.
The safe haven rose minutes before the central bank dropped its statement, but also fell sharply once traders noted the delay in plans to reduce bond purchases.
The Japanese Yen is trading lower across the board ahead of Bank of Japan Governor Kazuo Ueda's press conference scheduled for later today.