Investor expectations were dashed when the Bank of Japan failed to take bolder measures in an effort to halt the Japanese Yen’s rise; according to the communiqué, the BOJ will be introducing a facility to provide fixed rate funds for a 3-month period at a rate of .1%.
The surprise meeting of the Bank of Japan, originally scheduled for earlier today but now postponed until 5:00 p.m. (GMT), had investors sitting on the sidelines in anticipation of the outcome, but once the details became known, investors promptly moved funds back into the Yen. One foreign exchange strategist in Hong Kong commented that the markets were disappointed by the announcement, and had expected more aggressive measures including the expansion of the program to buy government bonds and a strategy to increase quantitative easing. As reported at 4:57 p.m. (JST) in Tokyo, immediately following the announcement, the Japanese Yen rose to nearly 87.00 Yen versus the U.S. Dollar.
When news of the BOJ’s emergency meeting first hit the markets, the Japanese Yen fell sharply and broadly, as investors had been under the assumption that an aggressive stance would be taken by the BOJ, especially given that the Japanese Finance Minister had recently commented that he was amenable to the country’s return to a policy of quantitative easing. Market players will be anxious to hear what Masaaki Shirakawa, the governor of the BOJ, has to say at the emergency meeting later.