BoJ Keeps Stimulus Unchanged, Retains Inflation Forecast

Haruhiko Kuroda Bank of Japan Governor. Kuroda is also expected to strike a dovish tone at Tuesday's BoJ meeting Wikimedia Commons

Haruhiko Kuroda Bank of Japan Governor. Kuroda is also expected to strike a dovish tone at Tuesday's BoJ meeting Wikimedia Commons

USD/JPY fell from about 110.93 to a low of 110.56 on the decision as it looks like market is focusing a bit on the statement that the BOJ said "inflation expectations have been more or less unchanged and recently moving sideways".

TOKYO, Jan 23 (Reuters) - Asian stocks advanced on Tuesday after US senators struck a deal to end a three-day government shutdown, sending Wall Street's main indexes to record highs and keeping the dollar well supported.

"With the economy ticking over fairly well but inflation still far from the 2-percent target, the last thing the central bank needs now is a damaging rise in the yen".

"I don't see anything in today's announcement that suggests a change in the BOJ's stance".

The bank stated that it would buy JGBs at an annual pace of around 80 trillion yen, adding it will "continue expanding the monetary base until the year-on-year rate of increase in the observed CPI exceeds 2% and stays above the target in a stable manner".

But Bank of Japan Governor Haruhiko Kuroda will likely seek to dispel market speculation of an early withdrawal of stimulus by reminding investors at his post-meeting briefing that inflation remains distant from his target.

"In the near-term, there will be focus on Kuroda's news conference, which could offer "a more dovish lean", said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore".

The dollar's index against a basket of major currencies stood at 90.49, not far off its three-year low of 90.104 touched on January 17.

USA lawmakers passed a short-term measure on Monday to fund the federal government through February 8.

Still, a boost from the deal did not last long partly because the measure secured funding for only a little more than two weeks, with the Republicans and Democrats still at loggerheads on many issues.

The rallying dollar, however, rose 0.05% to Y110.96.

The euro was supported ahead of the outcome of the European Central Bank's meeting on Thursday, which could provide clues to future shifts in the bank's monetary policy.

The Bank of Japan continued to keep monetary policy steady today, after it voted 8 - 1 to keep its short-term interest rate unchanged at -0.1%, but noted that inflation expectations had remained steady, which initially saw the country's currency gain.

But sources have told Reuters the European Central Bank is unlikely to ditch a pledge to keep buying bonds at its upcoming meeting on Thursday.

The other eye-catching currency market move came from Britain's pound as it topped $1.40 GBP=D4 for the first time since voters there chose back in 2016 to leave the European Union.

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