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BoJ has released their latest monetary policy decision for July

BoJ has released their latest monetary policy decision for July.

The announcement caused a volatility in the markets. The effect is likely to be neutral.

The Bank of Japan (BoJ) has released their latest monetary policy decision for July, delivering some key adjustments to the central bank’s strategy adjustments but overall delivering the same steady tone that the BoJ is known for.

Key highlights

The BoJ is maintaining their long-term yield target near 0%, but its policy framework will now be more “flexible”.

“The Bank will revise the purchase amount of each ETF and increase that of ETFs which track the Tokyo Stock Price Index (TOPIX).”

The short-term interest rate target is also at -0.1%.

The BoJ has adjusted their pledge on the long-term yield target.

BoJ: adopting forward guidance on policy rates, will maintain very low rate levels for an extended period of time, but long-term rates may move up or down to some extent depending on markets and the economy.

The BoJ will continue to conduct JGB buying in a flexible manner, still targeting an annual accumulation pace of ¥80 trillion.

The BoJ intends to maintain low rate levels ahead of next year’s sales tax hike.

ETF and REIT purchases may fluctuate.

The BoJ will be taking steps to reduce the balance of reserves with negative rates.

Market operations will have forward guidance applied to them, as well as asset purchases.

BoJ will continue to monitor risks to economic conditions from monetary policy, as well as any adjustments.

The BoJ will buy JGBs “promptly and appropriately” if yields climb too high, too fast.

BoJ board members Harada and Kataoaka opposed the decision to loosen the yield curve control target.

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