BOJ stands pat on rates, maintains dovish stance

As expected, the BOJ voted 8-1 to keep its short-term interest rate target at -0.1% and maintain its pledge to guide the 10-year government bond yield around 0%. The Bank also said it would offer to buy unlimited amounts of 10-year government bonds (JGB) at 0.25% every business day, reiterating guidance given in April.

On Thursday, the Bank of England hiked rates by 25 basis points to a 13-year high of 1.25%, while the Swiss National Bank surprised markets by lifting rates for the first time in 15 years.

This came after the US Federal Reserve on Wednesday increased interest rates by 75 basis points in what was its biggest hike since 1994.

Craig Botham, chief China+ economist at Pantheon Macroeconomics, said: "A spate of hikes - some larger than expected - by other major central banks, combined with renewed yen weakness, had fuelled speculation that the BoJ would capitulate today on yield curve control, and widen the band.

"But while the BoJ’s statement acknowledged the need to watch the impact of the yen on the economy and prices, in a more explicit departure from the previous line that yen weakness was a positive for the economy, messaging was otherwise unchanged from previous months. 10-year bond buying will continue in whatever quantities are needed to cap yields at 0.25%."