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Japanese Yen Weakened as the BOJ Takes a Dovish Stance

In: Finance, Forex

The yen weakened on Friday after the Bank of Japan maintained its ultra-easy monetary stance, continuing its policy divergence with its global peers.

The currency tumbled as much as 1.8% to 134.63 per dollar after the decision. The BOJ made a rare reference to the currency market, saying it needed to watch its impact on the economy and markets.

The central bank kept its policy settings for yield curve control and asset purchases, according to a statement Friday, in line with the forecasts of almost all surveyed economists.

Japanese stock futures briefly pared losses but remained lower — in line with regional peers — while bonds were shut for the lunchtime trading break.

Japanese and global markets had been in turmoil in the lead up to this decision as the Federal Reserve and its European counterparts accelerated tightening while Governor Haruhiko Kuroda continued to signal a dovish stance.

The yen slumped to a 24-year low this week, before recovering, while benchmark 10-year yields breached the 0.25% ceiling of the BOJ’s target range.

Japanese authorities have expressed increasing concern with the currency’s weakness, with Kuroda earlier this week reversing his insistence that it was generally a good thing by saying the recent slide was bad for the economy.

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