Bearish sentiment is strengthened by the central bank’s pledge to deploy additional stimulus if necessary.
Unlike other major central banks, which have hiked interest rates this year, the Bank of Japan has maintained sub-zero borrowing costs.
Japan’s currency weakened as much as 0.4% after the decision to around the 148.20 level against the dollar. Bonds edged higher. Economic data earlier in the day showed inflation was slightly faster than consensus in August as it hovered above the BOJ’s target for a 17th month, an outcome that casts further doubt on the central bank’s assertion that price growth will slow and that stimulus needs to continue for now. The BOJ’s insistence on sticking with its ultra-easy policy is a factor keeping pressure on the yen.
While financial authorities have warned that they are prepared to step into markets again, a policy move by the BOJ would likely have more effect at stemming the tide. Ditching the pledge might have offered the yen some support, but the central bank is also likely wanting to avoid giving any impression it is now simply responding to market moves.
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