The Bank of Japan headquarters is seen past traffic in Tokyo on November 1, 2016. Japan's central bank on Tuesday kept its policy steady as widely expected. The big news out of the central bank is that it would make its policy framework more flexible for the long-term yield target. The BOJ maintained its target for the 10-year government bond yield at around zero percent and the short-term interest rate target at minus 0.1 percent, however. In a statement, it explained that the yields may move up or down "to some extent mainly depending on developments in economic activity and prices." The decision comes after speculation last week that the Bank of Japan had been actively discussing changes to its policies, which caused Japanese government bond prices to fall steeply, and drove the benchmark 10-year yield to hit its highest in nearly six months. The BOJ also acknowledged that it will take "more time than expected" to achieve its inflation target of 2 percent. Soon after the announcement, the yield on U.S. 10-year Treasurys fell almost 3 basis points to 2.950 percent. The yen weakened, with the dollar gaining 0.25 percent against the yen to 111.33, and the Nikkei share average turned positive. Joseph Capurso, senior currency strategist at the Commonwealth Bank of Australia, said that the policy tweaks are "too small" to have an impact on Japan's economy. "We consider the BoJ's policy tweaks too small to make much difference to the outlook for Japanese GDP growth or inflation. Our long held view that Japanese inflation will fall well short of the BoJ's 2%/yr target is unchanged. Japan needs a much more ambitious stimulus program if the 2%/yr inflation target is ever to be met," he said. "It is a very mild policy change by the BOJ but its policy vector is heading towards tightening. The BOJ's message was to let long-term yields go higher," said Hiroaki Mutou, chief economist at Tokai Tokyo Research Institute.<doc-sep>Talking Points – YEN, BANK OF JAPAN, MONETARY POLICY, FED The Japanese Yen barely reacted to mixed economic data releases for June BOJ possibly considering monetary policy adjustments in announcement today Fed, BOE rate decisions may drive Yen volatility via influence on risk trends See our 3Q forecasts for currencies like the Japanese Yen and US Dollar in the DailyFX Trading Guides page The Japanese Yen started Tuesday’s trading session cautiously lower against its US counterpart, as local economic data crossed the wires. June’s jobless rate was 2.4%, a slight uptick from both economists’ forecasts of 2.3% and May’s result of 2.2%. Preliminary industrial production data for June clocked in at -1.2%, lower than expected 0.6% and 4.2% prior. Year-on-year loans and discounts for corporations for last month were 3.17%, higher than the previous 2.56%. USD/JPY 5-Minute Chart Despite the mild reaction to the mixed economic data, the anti-risk currency faces potential volatility following the much-anticipated Bank of Japan rate decision and outlook report later today. Speculative chatter suggests that the central bank may adjust its large-scale stimulus initiative. Possible changes could be trimming its 80 trillion yen quantities easing program or tweaking yield curve control tolerance thresholds. A change in the BOJ’s monetary policy could help Japanese commercial banks’ diminishing profit margins. Local lenders has suffered from the effects of a long-lasting stimulus program and low interest rates. The institutions could face more losses due to an increase in global borrowing costs. The United States Treasury announced on Monday that it will need to borrow up to $769b for the second half of this year, its largest amount needed since the 2007-2008 financial crisis. Such a move could send the US Dollar surging against the Yen and leave commercial bankers in danger of crisis. Looking further ahead, the Japanese currency may be further impacted by market risk trends and a packed week of economic events. Most notably, monetary policy announcements are due from the US Federal Reserve and the Bank of England. USD/JPY Trading Resources --- Written by Megha Torpunuri, DailyFX Research Team<doc-sep>Asian stocks closed lower on Monday, with investors wary as the Bank of Japan and other central banks hold policy meetings this week. The Nikkei 225 declined 0.74 percent, or 167.91 points, to close at 22,544.84, with falls in utilities, energy and pharmaceuticals leading the losses for the day. The broader Topix closed lower by 0.43 percent, with 21 of its 33 subindexes finishing in negative territory. Elsewhere, the Kospi pared steeper losses from earlier to close lower by 0.06 percent at 2,293.51 as investors digested earnings releases. Losses in large cap technology names offset gains seen in automakers and manufacturing sector plays, with index bellwether Samsung Electronics down 0.85 percent before the release of earnings due on Tuesday. Chinese stocks also finished the day lower, with the Shanghai Composite reversing moderate gains seen in the morning to end lower by 0.12 percent at 2,870.06. The smaller Shenzhen Composite pulled back by 1.39 percent by the end of the day while the blue-chip CSI 300 index, which tracks the biggest stocks traded on the mainland, finished lower by 0.16 percent. Meanwhile, in Hong Kong, the Hang Seng Index came under pressure, giving up 0.55 percent by 3:00 p.m. HK/SIN. The information technology dropped 2.23 percent by 3:00 p.m. HK/SIN, dragging on the index as heavyweight Tencent fell 2.36 percent ahead of the session's close. The consumer goods sector lost 1.8 percent an hour before the market close, contributing to the benchmark's overall declines. Down Under, the eased 0.35 percent to 6,278.40. Losses were led by the drop in the health care subindex, while heavily weighted "Big Four" banks all finished lower. MSCI's index of shares in Asia Pacific excluding Japan slipped 0.4 percent in afternoon trade. The negativity in the Asian session followed declines in U.S. stocks seen on Friday as earnings news stateside overshadowed the release of solid second-quarter U.S. gross domestic product data, with tech leading the losses. Intel shares fell in the previous session on the chipmaker announcing delays for next generation chips while Twitter sank after reporting a drop in monthly active users. That contributed to a second day of steep losses for the tech sector stateside after the plunge in Facebook's stock on Thursday. Meanwhile, U.S. second-quarter GDP grew at 4.1 percent, in line with expectations, with a jump in consumer spending and business investment contributing to the figure. That was the quickest pace of growth since 2014. Central banks in spotlight<doc-sep>Bank of Japan Press Conference overview Tuesday sees the Bank of Japan (BoJ) coming in for a landing with their latest Monetary Policy Statement and Outlook Report at 02:00 GMT, with a press conference to be held by the BoJ's Governor Kuroda, expected sometime after 02:30 GMT, but no specific time has been set. As noted by FXStreet's own Yohay Elam, movement from the BoJ on bond-buying led traders to once again suspect a 'stealth taper' from the Japanese central bank, but expectations of an early exit from stimulus programs could again slap the hands of over-eager JPY traders: "the BOJ has been reducing its bond buys of late, allowing the 10-year yield to edge up above the 0% target. This triggered speculation that the Tokyo-based institution is making a "stealth" withdrawal from its extraordinarily loose monetary policy. However, the BOJ may be cutting commercial banks some slack. Meager rates hurt banks' profits. The BOJ's primary goal is reaching a core inflation level of 2%, and with sub 1% levels on all the various measures, the Bank still has a long way and will likely leave its policy unchanged. This July meeting could end speculation about any upcoming withdrawal. The reiteration of the BOJ's loose policy may weigh on the Yen." How could it affect the USD/JPY? With the USD/JPY leaning towards the downside in the run-up to the BoJ's showing today, odds could be resting in favor of the bears as traders anticipate a possible disappointing reading from Japan's central bank, and according to FXStreet's Chief Analyst Valeria Bednarik: "the pair has held below the 111.40 Fibonacci resistance for over a week already, and the short-term picture indicates that bears are still in control of the pair, as it is stuck around a flat 200 SMA and well below the 100 SMA, while the Momentum indicator turned south, now crossing its mid-line, while the RSI holds directionless around 44. Upcoming direction depends on how the market reacts to BOJ's decision and Japanese data, with a break below 110.58, the low set last week, opening doors for a steeper decline below the 110.00 figure." Support levels: 110.55 110.20 109.75 Resistance levels: 111.40 111.85 112.20 Key notes 5 Things You Should Know About Bank of Japan Meeting USD/JPY: Two tweaks the BOJ could make tonight USD/JPY analysis: will the BOJ dare to change its monetary policy? USD/JPY Forecast: Central bank duel set to break the balance About the Bank of Japan Press Conference Kuroda, BoJ's governor, will give a press conference in order to communicate with investors regarding monetary policy. He talks about the factors that affected the most recent interest rate decision, the overall economic outlook, inflation, and clues regarding future monetary policy. About the Bank of Japan Monetary Policy Statement An official monetary policy statement is released by the Policy Board of the Bank of Japan. By communicating the committee´s vote outcome regarding interest rates and other policy measures as well as the economic conditions influencing their decision, the statement gives clue to future changes in monetary policy. About the Bank of Japan Outlook Report The Bank of Japan decides the text of the Outlook Report in April and October Monetary Policy Meetings and releases it semiannually, after it has presented its outlook for developments in economic activity and prices, has carefully assessed upside and downside risks, and has outlined its views on the future course of monetary policy.<doc-sep>
Asian shares closed narrowly mixed on Tuesday as investors digested the Bank of Japan's decision to keep policy steady. The mixed showing also came on the back of Wall Street posting losses amid weakness in the technology sector. The Nikkei 225 moved into positive territory on the back of the Bank of Japan's policy decision. The benchmark closed higher by 0.04 percent, or 8.88 points, at 22,553.72, despite most sectors finishing in negative territory. Shippers and mining stocks rose, while banks and utilities were among the worst performing sectors. The broader Topix eased 0.84 percent. Meanwhile, the Kospi ended the day higher by 0.08 percent at 2,295.26 after trading both above and below the flat line. That came as shares of Samsung Electronics slipped 0.54 percent after the smartphone and chipmaker reported second-quarter operating profit came it at 14.9 trillion won (around $13.4 billion), topping the company's own projection of 14.8 trillion won, according to Reuters. Revenue for the quarter came in at 58.5 trillion won, mostly matching an earlier forecast. In Australia, the finished the day marginally higher at 6,280.20, some 0.03 percent higher than its last close, with the energy subindex leading gains. Elsewhere, Hong Kong's Hang Seng Index edged lower by 0.5 percent by 3:00 p.m. HK/SIN. Chinese shares ended the day in different directions following the release of official manufacturing PMI that slightly missed expectations. The Shanghai Composite tacked on 0.26 percent to close at 2,876.40 while the Shenzhen Composite inched down by 0.02 percent to 1,576.41. The broad MSCI Asia Pacific ex Japan index was trading lower by 0.2 percent in Asia afternoon trade. Slight tweaks from BOJ