EUR/JPY gains as BoJ maintains easy policy, offers dovish guidance

The Japanese Yen retreated against the Euro on Friday, after the Bank of Japan maintained its ultra-accommodative policy and again pledged to keep monetary support until Japan’s inflation sustainably reaches the 2% target.

The BoJ left its benchmark short-term interest rate without change at -0.10% at its September policy meeting and also kept a 0% cap on 10-year bond yields set under its yield curve control policy.

The BoJ also left without change an allowance band of 50 basis points set on either side of the yield target, along with a new hard cap of 1%, which it adopted in July.

The BoJ Board again said that it would patiently continue with monetary easing and respond to developments in economic activity, the price dynamics and financial conditions amid extremely high uncertainty domestically and abroad.

The monetary policy committee reiterated it would take extra easing measures if necessary, while being mindful of rising inflation expectations.

“We have yet to foresee inflation stably and sustainably achieve our price target – that’s why we must patiently maintain ultra-loose monetary policy,” BoJ Governor Kazuo Ueda said at a press conference following the policy decision.

“Having said that, we will of course shift policy if achievement of our target is foreseen … Since we published the July outlook report, inflation isn’t overshooting sharply. But it’s not slowing as much as we expected.”

The BoJ’s decision came in contrast with those of other major central banks, which recently indicated interest rates would remain elevated to curb inflation.

As of 8:32 GMT on Friday EUR/JPY was edging up 0.39% to trade at 157.925, after earlier registering an intraday high of 158.282.