The Bank of Japan refrained from expanding its stimulus programme, expanded its loan scheme and cut the next fiscal year’s inflation forecast.
BOJ held off on expanding its massive stimulus programme. BOJ also maintained its pledge to increase base money, or volumes of cash and deposits at the central bank, at an annual pace of 80 trillion yen ($678 billion) by buying government bonds and risk assets.
BOJ unexpectedly expanded monetary stimulus in October last year due to the soft domestic demand and rapidly falling oil prices that resulted in slower consumer inflation, and a threat of further deflation.
The oil prices have lost nearly half of their value since October, keeping the central bank of Japan under pressure to act again in order to hit the 2 percent inflation target next fiscal year. Reuters reports that some traders were selling yen ahead of today’s meeting in a precautionary move against a surprise action.
The central bank of Japan also extended the March deadline of two loan programmes by one year. The programmes are aiming to encourage banks to give out more loans rather than sit on their pile of cash. Additionally, one of the programmes was increased from 7 to 10 trillion yen.
BOJ raised its economic growth forecast for the next fiscal year beginning in April. But it cut its core consumer inflation (CPI) forecast to 1.0 percent from an estimate 1.7 percent it issued three months ago, largely due to a collapse in global oil prices. However, the BOJ forecast for fiscal 2016 was raised to 2.2 percent from 2.1 percent, showing that Japanese bankers believe that Japan will manage to hit an inflation goal of 2 percent.
The dollar dropped to a session low 117.27 against the yen after the BOJ's announcement that it will maintain the monetary policy steady, slightly recovered since then and now trading at 117.72. Japan225 (Nikkei) dropped from yesterday’s high of 17522.48, showing volatility during today’s session and currently trading at 17310.00
MT4 GRAPH: USDJPY
MT4 GRAPH: Japan225 (Nikkei)
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