In today’s meeting, the Bank of Japan (BoJ) kept its monetary policy unchanged while the policy balance rate and the yield target on 10-year Japanese government bonds was maintained at -0.1% and 0% (+/-20bp), respectively, notes the analysis team at Danske Bank.
“The BoJ also maintained its forward guidance and left its asset purchases unchanged. The BoJ has clearly shifted to auto pilot mode after it announced some policy tweaks at the July meeting, and an unchanged signal from the BoJ today was fully expected. Hence, no reaction in USD/JPY or the Japanese fixed income market.”
“PM Shinzo Abe is expected to win the LDP (Liberal Democratic Party) leadership election, which takes place tomorrow. The BoJ's aggressive stimulus has been an important pillar of 'Abenomics', and given that Abe will continue as PM for several more years, political support for the BoJ monetary policy is likely to remain intact. We expect the BoJ to keep its current policy intact until the end of 2019 at least.”
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