There was some market speculation that the BOJ could do something to front run the European Central Bank's likely quantitative easing this week and potentially match the Swiss National Bank's move last week and cut its own deposit rate. This speculation was not realized, triggering significant appreciation in yen against the greenback since the BOJ announcement and also accelerated profit-taking into stock market. The yen added 0.8% to 117.84 per dollar after weakening for three days.
The Bank of Japan cut its inflation forecast for fiscal 2015 to 1% from 1.7% previously, but left its target for the monetary base unchanged in its policy decision today, citing brighter economic growth that could eventually help put prices back on a firm upward path. A continued slide in oil prices is making it even more difficult for the central bank to achieve its 2% inflation target anytime soon, but the absence of extra easing measures suggests the BOJ remains optimistic that underlying inflation remains in place and the economy could grow faster down the line.
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