In an unsurprising announcement at the end of its two-day policy meeting, the Bank of Japan announced on Tuesday that it will maintain the country’s negative 0.1 percent interest rate and the 10-year Japanese government bond yield target at around zero. The BOJ also upgraded its assessment of the Japanese economy, noting that the recovery is continuing at a moderate pace.
Data out of Japan on Monday showed an increase in November export volumes to a two-year high, which is due in part to the yen’s steady decline against the U.S. dollar in the past few months. The yen has slumped around 12 percent in the past three months. Despite Japan’s brightened outlook, it remains at risk if there are changes in U.S. monetary policy or changes in the country’s policy on global markets, both of which are likely to occur when Donald Trump takes office next month. Nevertheless, a large part of Japan’s expected growth in 2017 is expected due to the country’s fiscal stimulus program which will invest heavily in public work projects next year.
Market Reaction?
The global markets traded relatively flat on Tuesday, with the yen trading 0.2 percent lower against the U.S. dollar after the announcement. The euro was trading at $1.0413 on Tuesday, a slight rebound from its 0.5 percent loss on Monday. The dollar index remained steady at 103.11 against its primary trading partners. Gold prices also remained relatively stable on Tuesday, trading at $1,138.20.
Traders have also been eyeing some more exotic currencies recently following terror attacks in Ankara and Berlin. The Turkish lira held steady on Tuesday after falling 0.7 percent on Monday. The currency was trading at 2.5325 per dollar. The Russian ruble also bounced back from its Monday losses, trading at 61.9048 per dollar on Tuesday, after the Russian ambassador to Turkey, Andrey Karlov was killed in what is believed to be a terror attack on Monday.