Tatler-Cox: BOJ Abandons Monetary Supply Target

Tatler-Cox: Eagerly-anticipated central bank meeting delivers change but little cheer among investors.
Tatler Cox: The highly-anticipated meeting of the Bank of Japan's (BOJ) monetary policy committee saw the central bank deliver the review it had promised but little in the way of cheer for investors.
The central bank left interest rates unchanged at -0.1% despite having telegraphed to markets that there was ample scope to take rates deeper into negative territory and suggestions that it would focus more on rates than on the asset purchases it has been making as part of its quantitative easing program.
The BOJ abandoned its target for increasing the base money supply by 80 trillion yen a year in favor of targeting the yield curve of Japanese government bonds at varying maturities. Initial reaction to the announcement was mildly encouraging with the yen weakening against the US Dollar and the benchmark Nikkei 225 index rising by more than 2% but as markets digested the minutiae, the yen strengthened and stocks pared gains.
"While initial reactions may have been positive, we think this meeting will be remembered for how it disappointed investors," said Mayla Yakumi, chief investment officer at Tatler-Cox.
"Many investors had been hoping for something a little more decisive from the BOJ but what they got was more pledges to reach the 2% inflation target and some tinkering around the yield curve."
The BOJ has been the boldest central bank in terms of its willingness to use unconventional monetary policy to achieve its aims but its Governor, Haruhiko Kuroda, has recently begun to weigh the costs of persisting with the massive QE program against its benefits.
Tatler-Cox has no plans to reduce exposure to Japanese equities but it says it will not be adding to holdings in the near-term.