TOKYO (Reuters) - The Bank of Japan eased monetary policy by boosting its asset buying scheme in a rate review that was cut short by one day in the wake of Tokyo’s solo intervention to weaken the yen.
— The nine-member board made the decision by a unanimous vote. The central bank also maintained its benchmark policy rate at a range of zero to 0.1 percent by a unanimous vote.
— The BOJ increased the size of its asset buying program to 15 trillion yen ($195 billion), a rise of 5 trillion yen. It also increased a program offering cheap fixed-rate funds via its market operations by the same amount to 35 trillion yen.
— As a result, the size of its fund for asset buying and market operations backed by collateral was topped up by 10 trillion yen, to 50 trillion yen.
— The BOJ hopes to achieve the 50 trillion yen target by the end of 2012.
— BOJ Governor Masaaki Shirakawa will hold a news conference from 4 p.m. (0700 GMT).
“Of the original 10 trillion, JGBs made up 20 percent. Of the 15 trillion they make up 27 percent. That’s a reasonable rise and probably worth another 50 pips or so in FX. To be worth a lot more, I would have needed to have seen a larger announcement. And remember, JGBs make up 46 percent of the BOJ’s balance sheet — this increase in the asset purchase will thus tend to bias that number lower. Bottom line, we needed to see a lot more JGBs being purchased in my view, even if this is a very small step in the right direction.”
SEIJI ADACHI, SENIOR ECONOMIST, DEUTSCHE SECURITIES, TOKYO
“This is likely to have a positive effect on the stock market and help prevent a further rise in the yen. It’s a good thing that the Bank of Japan acted quickly, and that its action was coordinated with the government’s intervention.
“The things we have to watch out for are upcoming U.S. jobless data and the FOMC. Any indication of further easing on the U.S. side could mean Japanese authorities need to continue intervening intermittently.”
“The BOJ’s decision (on its asset buying scheme) was in line with what media have reported, so there was no surprise.
“In tandem with the Finance Ministry’s intervention, the BOJ carried out its objective to help indirectly weaken upward pressure on the yen by easing monetary policy.
“If U.S. jobs data and other upcoming U.S. economic events fan worries about the U.S. economy, the yen may appreciate again. If that happens, expectations of further intervention and more monetary easing steps will increase.”
HIROAKI MUTO, SENIOR ECONOMIST, SUMITOMO MITSUI ASSET MANAGEMENT CO, TOKYO
“This amount isn’t enough, so the BOJ will likely increase asset purchases over time in 5 trillion yen installments.
“The BOJ is a little reluctant to expand its balance sheet, but that’s the only thing that most FX traders look at when comparing the BOJ to other central banks.”
KOICHI ONO, SENIOR STRATEGIST, DAIWA SECURITIES CAPITAL MARKETS, TOKYO
“The easing measures themselves that the BOJ decided to use are not surprising. They were in line with market expectations. What was a little surprising was that they brought forward the decision by a day.
“The central bank seems to be working in sync with the MOF, and that is different from past times when they eased policy. It’s a message that they are willing to act to stop the yen from appreciating further.
“It still remains to be seen whether the easing will actually temper the yen’s strength. The market focus has already shifted to what the BOJ may have to do if yen strength persists.”
Text of BOJ policy statement: here
— Japan intervened in currency markets on Thursday to curb the yen’s gains, which officials feared could derail the economy’s recovery from a slump triggered by the March 11 earthquake disaster.
— Sources familiar with the central bank’s thinking had told Reuters the BOJ would ease monetary policy if Tokyo stepped into the market, to maximize the effect of weakening the yen. ($1 = 76.890 Japanese Yen)
Reporting by Tokyo newsroom; Editing by Michael Watson