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An optimistic BOJ statement helped Asian session traders shrug off risk aversion from the previous session.

  • Business NZ manufacturing index up from 56.9 to 58.5
  • BOJ keeps policies unchanged as expected
  • BOJ upgrades private consumption and overseas growth estimates

Major Events/Reports

BOJ keeps policies unchanged

As expected, the Bank of Japan (BOJ) kept its policies unchanged for another month.

The interest rate stayed at -0.1%; the target for 10-year JGB yields remains at “around zero percent”; and the outstanding JGB holdings will be maintained at a pace of 80 trillion JPY annually.

One major takeaway from the release is that the BOJ now believes that “private consumption has increased its resilience,” an improvement from its “private consumption has been resilienttext in late April.

The central bank also grew more confident on overseas growth prospects, saying that “exports are expected to continue their moderate increasing trend on the back of the improvement in overseas economies.” If you recall, the BOJ’s last thoughts on the matter were that developments in overseas economies are “skewed to the downside.”

For reference, the BOJ cited U.S. economic policies and their impact on global financial markets; developments in commodity-exporting economies; Brexit negotiations, and Europe’s debt problems as factors on its “overseas growth” estimates.

Another major takeaway from the event is that BOJ Governor Haruhiko Kuroda and his team are nowhere near an exit strategy. This is good news for investors who had been expecting the central bank to ease the pedal from the metal now that Japan’s inflation is doing a bit better.

Overall, the BOJ’s release communicated confidence that the recovery of Japan’s export-dependent economy is gaining momentum. Don’t miss Kuroda’s scheduled press conference at 6:30 am GMT to see if he has more sentiments on the BOJ’s exit strategy (or the lack thereof)!

Overall risk appetite

As I mentioned in my U.S. session recap, risk-takers weren’t feeling any love after Apple’s (AAPL) shares dragged the other tech stocks while the prospect of monetary tightening from the Fed kept investors at bay.

Fortunately, Asian session bulls came out to play. Thanks to (mostly) positive U.S. data and an optimistic BOJ statement, high-yielding assets (including currencies) saw some gains.

  • Nikkei is up by 0.52% to 19,934.50;
  • Australia’s A SX 200 is up by 0.19% to 5,774.00;
  • The Shanghai index is up by 0.22% to 3,125.75, and
  • Hang Seng is up by 0.45% to 25,680.50.

Major Market Mover(s):

JPY

The yen lost pips against its major counterparts a few hours before the BOJ printed its decision. The low-yielding currency maintained its losses as risk appetite soon took over the Asian markets.

USD/JPY is up by 27 pips (+0.24%) to 111.18, EUR/JPY is up by 32 pips (+0.26%) to 123.94, and GBP/JPY is up by 53 pips (+0.38%) to 142.02.

Watch Out For:

  • 6:30 am GMT: BOJ’s Kuroda to give a speech
  • 8:00 am GMT: Italian trade balance (3.41B EUR expected, 5.42B EUR previous)
  • 9:00 am GMT: Euro Zone final CPI (y/y) to remain at 1.4%?
  • 9:00 am GMT: Euro Zone final core CPI (y/y) to remain at 0.9%?
  • 11:00 am GMT: BOE’s quarterly bulletin