The Bank of Japan left interest rates and other monetary policy settings unchanged during the meeting today. Such a decision was expected by the markets. However, market participants hoped that BoJ will at least provide some more hawkish forward guidance given that inflation stays above BoJ target and JPY continues to weaken. Unfortunately for JPY bulls, Kuroda did not throw yen a lifeline and stuck to his dovish rhetoric. Key takeaways from Kuroda's post-meeting speech:
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Interest rates should not rise
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Inflation is fuelled by high commodity prices
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Wage increases insufficient compared to price increases
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Wages need to increase quicker than CPI inflation in order for inflation to persistently be near target
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Recession is not expected
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Excessive bond buying last month was related to speculative factors
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BoJ will return to "normal" magnitude of bond purchases
EURJPY recovers from yesterday's losses. The pair should remain volatile throughout the day as inconclusive expectations for a ECB decision are likely to result in a surprise. Source: xStation5
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