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Analysts at Danske Bank note that as widely expected, the BoJ this morning kept the policy rate unchanged at -0.1%, but introduced ‘forward guidance’, with the intention to keep short- and long-term rates ‘very low for an extended period of time’.

Key Quotes

“The BoJ said that it would likely take more time than expected to reach the 2% inflation target, as the inflation forecasts were reduced.  Importantly, the 10Y yield target was kept unchanged around 0.1%. The BoJ will now allow more flexibility in bond operations and allow more upward and downward movements in 10-year JGB yields.”

“JGB 10 year yields are lower after the announcement as market speculation that the 10-year yield target could be lifted to secure a steeper curve was wrong. Japanese stocks were little changed after the announcement. USD/JPY is higher on the announcement.”