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BoJ Keeps Markets Waiting for End of NIRP

The Bank of Japan has left its monetary policy unchanged as widely expected. It kept the negative interest rate policy (NIRP), yield curve control (YCC), and asset purchases unchanged.

The decision was the consensus expectation, even though earlier signs suggested a higher risk of an end to the NIRP at the December meeting, as we noted here. BoJ Governor Ueda avoided any clear hawkish signs for a move at the January meeting; however, the BoJ is preparing the way for an eventual move, even if very slowly.

USDJPY jumped after the decision, moving towards 145, as traders were left disappointed. We do think that USDJPY will remain heavy, as the decision is only postponed, and relative monetary policy and US-JP10Y spread will move in favour of the JPY versus USD.


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