(July 29 Bloomberg) The Bank of Japan's most anticipated policy announcement in years left investors underwhelmed, sparking a surge in the yen and sending government bonds and emerging market stocks lower.
Japan's currency rallied against all of its 31 major peers after the BOJ kept its government bond buying target and policy interest rate unchanged, opting instead to increase exchange-traded fund purchases. Yields on 10-year JGB's climbed the most since 2013, while rates on similar maturity Treasury notes increased from a two-week low. In Europe, better-than-estimated earnings from Barclays Plc and UBS Group AG helped stocks extend their biggest monthly advance since October. Oil headed for a bear market, while gold pared a second month of gains.
A month of big swings in the $5.3 trillion-a-day foreign exchange market is set to end with a bang as markets digest the BOJ's decision, a U.S. report expected to show a pickup in economic growth and results of bank stress tests in Europe. Investors are alos watching earning from companies including Merck & Co., Exxon Mobil Corp. and Chevron Corp. for further clues on how global monetary stimulus is filtering through the economy.
The BOJ's expanded stimulus "was as minimal as possible," said Stefan Worral, director of equity cash sales at Credit Suisse Group AG in Tokyo. "The tension was extremely high going into the announcement, and the market has reacted in a way that has perhaps reflected that."
The yen climbed 1.5 percent to 133.65 per dollar at 10:25am in London, bringing its gain this year to about 16 percent.
BOJ Governor Haruhiko Kuroda led his boardd in voting to increase its ETF program to 6 trillion yen ($58 billion) a year, the BOJ said. The announcement comes after decisions this month from the Federal Reserve, the European Central Bank and the Bank of England to leave their key interest rates unchanged as they assessed the economic fallout from the U.K.'s vote to leave the European Union.
"The BOJ's disappointment, which also follows the ECB and BOE's recent decisions to hold off easing, may just cause markets to re-assess whether they had front-run things too much," said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore.
Click on the link below to see the full story from Bloomberg: (by Emma O'Brien and Stephen Kirkland)