Yen jumps today after BoJ kept monetary policies unchanged. Interest was held at -0.1% while target of annual monetary base expansion was maintained at JPY 80T. Meanwhile, BoJ created a JPY 300b loan program to provide funds to financial institutions hit by earthquake, at zero interest. BoJ also lowered inflation forecast and pushed back the timing for meeting 2% target by 6 months. That is, BoJ now projects inflation to climb back to target until March 2018. The move, or the lack of move, caught markets by a surprise and there were some expectations of additional monetary stimulus from this meeting. Yen crosses dived broadly and in general, USD/JPY, EUR/JPY and GBP/JPY are all kept in medium term down trend. Revisit of recent low of 107.62, 121.70 and 151.64 in respective crosses could be seen in near term.
Earlier today, RBNZ left the policy rate unchanged at 2.25%. The accompanying appears less dovish than the previous meeting as policymakers again noted the housing price pressure in Auckland and they decided to drop the phrase that headline inflation will 'take longer to reach the target range'. However, the easing bias remains with the central bank noting that 'further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data'. The possible timing for another rate cut might be in June or August, given both are full MPS meetings. More in RBNZ Keeps Its Powder Dry In April, Less Dovish Though Easing Bias Remains.
Overnight, Fed again left the monetary policy unchanged with Kansas City Fed president Esther George the only members favoring a rate hike. Policymakers downgraded the assessment of economic activities but added the moderation in pace should be transitory. While acknowledging improvement in the labor market, the central bank saw little evidence that inflation and inflation expectations were firming. The 'risk' language was removed, while discussions are that 'balance of risk' was not found, in the April statement. It was, however, replaced by the pledge that the Fed would continue to 'closely monitor inflation indicators and global economic and financial developments'. We see the Fed is not in a hurry to increase interest rate further. While there remains chance for a hike in June, policymakers refrain from indicating a high chance of it. More in Fed Removes Language On Risks, June Hike Remains Possible But Uncertainty Increases.
On the data front, Japan national CPI core dropped to -0.3% yoy in March while Tokyo CPI core was unchanged at -0.3% yoy. Unemployment rate dropped to 3.2%, household spending dropped -5.3% yoy, retail sales dropped -1.1% yoy, industrial production rose 3.6% mom, housing starts rose 8.4% yoy. Australia import price index dropped -3.0% qoq in Q1. German unemployment and CPI, Eurozone confidence indicators will be the main focus in European session. US will release Q1 GDP and jobless claims later in the day.