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The Japanese yen fell to a six-week low as traders reacted to the outcome of the Bank of Japan meeting.
The bank omitted to communicate details on the expected cut in the bond-buying program.
The Bank of Japan is expected to gradually reduce its massive bond purchases but could only come up with a timeline at its July meeting. The move was perceived as dovish and drove the yen and Japanese yields to the downside.
As a result, yields could remain under pressure, affecting the differential with US yields and potentially weighing on the Japanese currency. A weaker yen could revive concerns about an intervention by Japanese authorities.
BoJ Governor Kazuo Ueda emphasised the importance of progressively reducing Japanese Government Bond (JGB) purchases to maintain bond market stability while remaining flexible. Despite high economic and price uncertainties, the BoJ plans to start reducing JGB purchases immediately following the next policy meeting’s decision. Ueda noted that the central bank could adjust rates as necessary.
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