Tokyo’s Nikkei reversed course to trade 0.3% higher, while the yen slipped to 158.19 per dollar, its lowest in more than six weeks, as the Bank of Japan takes another step toward pulling back from its massive monetary stimulus
Japanese shares rose on Friday, outperforming weaker Asian markets, and the yen slipped broadly after the BOJ said it would start reducing its huge bond purchases in the future, dashing some expectations it would begin the process sooner.
Tokyo’s Nikkei reversed course to trade 0.3% higher, while the yen slipped to 158.19 per dollar, its lowest in more than six weeks, as the Bank of Japan takes another step toward pulling back from its massive monetary stimulus.
Investors are also pondering the outlook for U.S. rates after the Fed tempered its rate-cut views even as inflation came in lower than expected, with the dollar staying near a one-month high on the back of the hawkish Fed.
While the Bank of Japan said it will continue to buy government bonds at the current pace of around 6 trillion yen ($38 billion) per month, it also committed to laying out details of its tapering plan for the next one to two years at its meeting in July.
The Bank of Japan said on Friday it will collect views from market players, before deciding on the long-term tapering plan at its next meeting. As widely expected, the central bank kept its short-term policy rate target in a range of 0-0.1% by a unanimous vote.
The Bank of Japan left markets searching for direction, according to Fred Neumann, chief Asia economist at HSBC. By offering no specifics in its bond purchase reduction, the Bank of Japan indicated that it is not in a hurry to tighten policy.
The yen, which is extremely sensitive to U.S. Treasury yields, is more than 10% lower against the dollar this year and was last at 158.15 per dollar, down more than 0.6% on the day.
The yen is at levels last seen on April 29, when it reached a 34-year low of 160.245 that triggered several rounds of interventions by Japanese authorities totalling 9.79 trillion yen ($62.25 billion).
If Bank of Japan wanted to arrest any weakness in JPY, today’s statement was not helpful, said Tom Kenny, senior international economist at ANZ, noting that the announcement on quantitative tightening was a little bit underwhelming.
He added: The BOJ more or less kicked the can to the next meeting.
Across Asia, stocks wobbled, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.10%. Chinese stocks also dropped, with the blue chip stocks down 0.4%.
