The latest Monetary Policy Statement and Interest Rate Decision of Japan have been made public in a Press Conference on Wednesday, held by the Bank of Japan’s (BoJ) chairman – Haruhiko Kuroda.
As expected by forecasters, the central bank’s nine-member board decided to leave the Interest Rates unchanged, as the inflation rate is still far off its 2 percent goal. However, the Bank of Japan appeared to be hawkish about the Japanese economy, in spite of global trade tensions.
BoJ keeps monetary policy steady and the interest rates low
In line with the forecasts, the Bank of Japan held its extremely low interest rates of -0.1%, a decision that was made by a 7-2 majority vote. While uncertainties were taken into consideration, the overall BoJ statement seemed to describe the Japan economy from a positive point of view, claiming it is expanding moderately, with the Consumer Price Index (CPI) in the range of 0.5-1.0 percent and the inflation rate unchanged.
On a long run, the plans include guiding the 10-year government bond yields: “The Bank will purchase Japanese government bonds (JGBs) so that 10-year JGB yields will remain at around zero percent”. The next public release will take place on October 31, but the bank intends to maintain its extremely low interest rates over a long period of time.
The impact on the USD/JPY currency pair
After the Press Conference, the USD/JPY started to show a little movement, trading at 112.17, while the Japanese Consumer Price Index core was expected to reach 0.9%. The pair was steady in North America, but showed little movement and it ticked lower in the Asian session.
However, in spite of the interest rate differential which can offer the possibility of a carry trade situation; forex traders should remember the USD/JPY is at risk of having unexpected pullbacks based upon negative news headlines, which can happen any time.