Breaking: BOJ eases policy further, boosts purchases of corporate bond, commercial paper, USD/JPY drops

At its shortened one-day virtual monetary policy meeting, the Bank of Japan (BOJ) board members decided to keep rates unchanged at -10bps while maintaining 10yr JGB yield target at 0.00%.

The BOJ eased policy further, said it will increase the purchases of a corporate bond, and commercial paper. The central bank also pledged to buy an unlimited amount of JGBs, removes pledge to buy JGBs so its holdings increase at an annual pace of around 80 trln yen.

Additional headlines

Expands loan programme to combat coronavirus.

To buy up to 20 trln yen of corporate bonds.

To relax rules for its corporate bond, commercial paper purchases.

To extend duration of corporate bonds it buys to 5 years.

Will actively buy JGBs, short-term securities to keep yield curve stably low.

To expand type of assets it accepts as collateral for its loan programme aimed at combating coronavirus.

Will include state-affiliated financial institutions as eligible entity for loan programme aimed at combating coronavirus.

 Will mull new fund supply means for financial institutions.

Will increase maximum amount of commercial paper and corporate bonds it buys per single issuer to 500 bln yen, 300 bln yen, respectively.

Will apply 0.1% interest to outstanding balance of current accounts held by financial institutions at BOJ for those tapping its loan scheme.

The central bank increased the annual pace of ETF purchases to ¥12 trillion (previously ¥6 trillion) and introduced a new lending programme to smooth funding for firms at its March 16 emergency meeting.

About BOJ Interest Rate Decision

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.

FX implications 

USD/JPY is testing lows near 107.40,as the yen popped up on the policy announcement.