The Bank of Japan surprises the markets by remaining ultra-loose

Key Topic:

o The day began with a focus on inflation data from Japan and the Bank of Japan's monetary policy.

o The hotter-than-expected Tokyo core inflation raised expectations for the Bank of Japan to adjust its ultra-loose policy.

o However, the Bank of Japan surprised the markets by deciding to maintain its ultra-loose monetary policy.

o The day started with a busy economic calendar, with Japan's inflation numbers and the Bank of Japan's policy being closely watched.

The inflation numbers exceeded expectations, leading to speculations that the Bank of Japan would make changes to its ultra-loose policy. News emerged suggesting that the Bank of Japan planned to adjust the Yield Curve Control (YCC) policy, allowing government bond yields to occasionally exceed the 0.5% cap. However, the Bank of Japan disappointed investors hoping for such changes.

This morning, the Bank of Japan kept interest rates unchanged at -0.10%, in line with market expectations. However, they did not modify the Yield Curve Control Policy, which maintains a range of +/- 0.50% for 10-year government bond yields.

According to the Statement on Monetary Policy, the Bank's decision received 8 votes in favor and 1 vote against leaving the yield control policy unchanged.

The USD/JPY currency pair experienced fluctuations in response to the Bank of Japan's monetary policy decision. Prior to the decision, USD/JPY reached a low of 138.708 and then climbed to a high of 139.590.

However, in response to the Bank of Japan's decision to maintain the status quo, USD/JPY dropped to a low of 138.471 before surging to a high of 141.073.

As of now, the USD/JPY is up 0.23% at 139.747.