Bank of Japan leaves policy unchanged in wake of United States hike

Bank of Japan leaves policy unchanged in wake of United States hike

The BoJ reiterated that the economy is likely to turn to a moderate expansion. The BoJ added that additional stimulus, which now includes bond purchases of United States dollars 706 billion per year, including a possible rate cut of the short term or long term rate will be considered if necessary.

"With the Fed not giving an indication of faster rate increases, the BOJ must have judged it's best to signal its easing stance", Fujishiro said.

Gold prices gained in Asia on Thursday, shrugging off a Fed rate hike and language that suggested at least two more ahead this year as investors looked ahead to the Bank of Japan's latest policy review.

It said that it will conduct purchases of government bonds at an annual pace of around 80 trillion yen to achieve this. The chart below illustrates how the 10-year and 2- year government bond yield declined following the rate announcements.

The Fed's rate hike isn't all good news for the BOJ.

The BOJ hopes to dispel such speculation and stress it won't raise its yield target unless the economy strengthens enough to accelerate inflation stably toward 2 percent, say sources familiar with its thinking.

Some analysts say the BOJ may be forced to raise its yield target to avoid ramping up bond purchases if Japanese long-term interest rates track global bond yield rises, which are being driven by expectations of higher USA interest rates.

Owing to rising energy prices the BoJ expects a rise in inflation rates.

BADEN BADEN, Germany, March 17 Bank of Japan Governor Haruhiko Kuroda said on Friday there is a consensus among the global community that it was important to promote free trade.

What matters for the BoJ now is that JPY does not appreciate further. "In addition, I see no change to inflation expectations", said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities. "The world economy has been on a solid recovery trend since late previous year. but we think the downside risks for (Japan's) economy and prices still outweigh the upside". "The global economy is picking up and Japanese exports are rebounding, signalling Japan's economy is on the rise".

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