A Straight Bat

The BoJ plays a straight bat and leaves its core monetary policy settings unchanged, matching the view of almost all sell-side economists, albeit being at odds with recent developments in Japanese markets. Expect a volatile re-open for JGBs and Japanese swaps as a result.

• On its bond purchases the BoJ noted that “in order to encourage the formation of a yield curve that is consistent with the guideline for market operations, the Bank will continue with large-scale JGB purchases and make nimble responses for each maturity by increasing the amount of JGB purchases and conducting fixed rate purchase operations.”
• The decision was backed by 9-0 votes across the board.
• There have also been some tweaks to “principal terms and conditions for funds-supplying operations against pooled collateral" and the “principal terms and conditions for the loan support program,” as well as introducing a facility “with a view to supporting a wide range of private sector efforts on climate change.” Note that the Bank also extended the deadline for loans to stimulate bank lending.
• When it comes to the Bank's underlying CPI projection’s there was a mark higher for the current FY, along with some tweaks further out, but crucially, there was no indication that the Bank expects to achieve its inflation target over the medium term.