Yen gives up gains, bonds stay strong after BOJ stands pat as expected
TLT•The yen gave up some gains and Japanese government bonds held onto gains after the Bank of Japan kept its policy rate at 1.25%, while signalling vigilance on inflation. The BOJ also said it would accelerate ETF sales to 860 billion yen ($5.45 billion) a year from January, up from 330 billion yen.
1. Rate decision and outlook
The Bank of Japan kept its policy rate at 1.25%, as expected, but signalled vigilance about inflation risks, leaving scope for a rate hike as soon as December. Governor Kazuo Ueda said underlying inflation had reached levels consistent with the BOJ’s target and that financial conditions remained accommodative.
2. Markets and ETF sales
The yen was largely flat at 157.64 to the dollar after earlier strengthening as much as 0.4%. The 10-year Japanese government bond yield fell 7 basis points to 2.22%, while the Nikkei 225 closed 2.1% lower at 63,290.11. The BOJ said it would increase annual ETF sales to 860 billion yen from 330 billion yen starting in January.
