Yen defies sudden policy tweak by BOJ

Today Bank of Japan (BOJ), unexpectedly tweaks its policy and traders were just taken by surprise. Yen dropped as low as 123.57 per Dollar in the spot market, before recovering sharply as the tweak was relatively small. Moreover yesterday's big selloffs in stocks, keeping Yen sellers on the sideline, faring further selloffs, post FED might lead to run for the safety of Yen.

Bank of Japan, while kept the interest rate same at 0.1%, BOJ announced it will extend the maturity of its government bond portfolio from current 7-10 years to new 7-12 years saying the move is intended to flatten the yield curve. In addition to that, it has increased its ETF buying pace by ¥300 billion per annum, in addition to current program. As of now, BOJ is buying FTFs at ¥3 trillion per annum. It will buy ETFs linked to JPX-Nikkei 400 index and the new program will kick start from April 2016.

However, BOJ board is far from unity. 6 policymakers voted in favor of the new program, while 3 voted against.

First reaction to sell Yen was led by surprise and partial information transmission, but since the new program is just an increase by 0.4% over current overall program, retracing was natural.

Nevertheless this increase might incentivize companies to improve investments and shareholder return as BOJ will target companies under the new program, who are proactively making investment in physical and human capital.

Yen is currently trading at 121.9 per Dollar.