The Bank of Japan ( BOJ) kept its key policy rate unadjusted at the conclusion of its two-day March financial policy review conference on Friday.

Will apply specific rates of interest as reward to banks current account balances.

Markets anticipated the Japanese reserve bank to permit the longer-term bond yields to fluctuate more around its target while hinting at a “stealth” tapering of its big purchases of exchange-traded funds (ETF).

Makes tweaks to tiered deposit reserve system.

USD/JPY leapt off lows and briefly regained the 109 level on the BOJ announcement, decently flat on the day.

Market reaction.

The reserve bank left the key rate steady at -10 bps while keeping its pledge to buy J-REITS at an annual speed of up to JPY180 bln.

Makes no modifications to its rates of interest forward guidance.

The yen experienced offer the truth trading after the BOJ modified the yield and ETF target, as it was already priced by the markets.

In plan, interest rates, which will be linked to short-term policy rate, will be used to specific amount of banks existing account balances.

Will develop interest plan to promote loaning.

The BOJ clarified in a policy statement that the 10-year JGB yield may move up or down 0.25% (not 0.2%) around its 0% target.

Will present plan that mitigates impact on banks earnings at time of rate cuts depending on amount of their lending.

Will modify method to compute macro add-on balances under complementary deposit facility.

Will maintain its overshooting commitment on base money growth.

Proper to preserve YCC and QQE to attain 2% inflation.

When required, will present fixed-rate purchase operations for successive days as powerful tool to set upper limitation to rates.

Excessive falls in super-long yields might harm financial activity long-lasting.

BOJ fine-tunes assistance on long-lasting interest rate target.

Effective to buy ETF, REIT massively when markets destabilise hugely.

Statement summary.

Will keep 12 trln yen ceiling for ETF, 180 billion yen ceiling for REIT even after pandemic subsides.

The main bank changed the ETF buying limitations – removing the lower ceiling of 6 trillion yen ($ 55 billion) while keeping n ceiling of 12 trillion yen..

Cutting rates is essential choice as active, extra alleviating step.

Clarifies long-term rates can move 0.25% up and down from its long-term rate target, however wont use this rule rigidly when rates briefly undershoot in daily motions.

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