Bank of Japan has retained interest on hold by maintaining its monetary policy on Friday whilst upgrading their assessment of private consumption and overseas growth; signaling its confidence that an export focused economic recovery was broadening and gaining momentum.
Short term interest rates will remain at -0.1% and 10-year Government Bond yields close to zero.
Unlike the US Federal Reserve, who has reduced their massive stimulus program, the Bank of Japan is unlikely to adopt the same approach whilst Japanese inflation is nowhere near BOJ’s 2% target.
Following the Policy Decision, a statement from the BOJ stated; “Private consumption has shown increased resilience against a background of steady improvement in the employment and income situation”
In early trading USDJPY touched a high around 111.37 and is currently trading around 111.15. Japan’s Nikkei 225 advanced 0.7%, narrowing its loss for the week to 0.3%.
GBP moved higher on news that Prime Minister Theresa May has reached a “broad agreement on a governing agenda prioritizing Brexit and UK unity with Northern Ireland’s Democratic Unionist Party”.
The forex markets take this as a positive with “stability” returning to the UK Government. GBP has also been bolstered with signs that there is a likely shift in the Bank of England’s policy on keeping UK interest rates at record lows. GBPUSD is currently holding above 1.2750 & EURGBP remains close to the early Friday high of 0.8741.
The Dollar Index rose to 97.539 extending the 0.5% gain it had on Thursday. [Bank of Japan]
With USD strengthening gold has seen muted trading currently trading at $1254.50. If gold fails to recover from current levels it will mark a weekly loss of 1% and a second weekly decline.
WTI also remains “depressed” trading close to a 6 week low due to continued concerns over rising US inventories adding to an already heavy supply of Oil in the global market.
Friday is relatively “light” on economic data releases with the University of Michigan Consumer Sentiment Index at 15:00 BST and Dallas FOMC Member Kaplan speaking at 17:45 BST. [Bank of Japan]