The Japanese yen fell against the dollar and is poised to register its biggest daily loss in almost three weeks on Tuesday after the central bank pledged to keep interest rates low and adopted a forward guidance model to strengthen its commitment for its massive policy stimulus.
According to BOJ Governor Haruhiko Kuroda, the bank would allow the yield to move within a range between minus 0.2 percent and 0.2 percent, while the previous de facto limits were minus 0.1 percent and 0.1 percent.
A gauge of global equity markets fell on Monday, pulled down by a sell-off in US technology heavyweights, while the dollar slipped against the euro ahead of several central bank monetary policy meetings later this week.
"I think the BOJ was successful in tweaking its policy scheme which did not greatly impact markets but introduced a tool, forward guidance for policy rates, for future tightening".
The yen fell 0.4 percent to 111.49 per dollar, the weakest in more than a week.
"The BOJ is now more engaged and prepared to fight a long-run battle against deflation or disinflation", said Shigeto Nagai, Head of Japan Economics at Oxford Economics. The BOJ maintained its target for the 10-year government bond yield at around zero percent.More news: Police fatally shoot resident who shot home intruder
The dollar index, which has risen 2.6 per cent for the year, was on pace to finish July down 0.2 per cent, its first monthly decline since March. Overall purchases of exchange-traded funds are kept at 6 trillion yen ($54 billion) but those linked to the Topix will increase to 4.2 trillion yen, from 2.7 trillion yen, further reducing the weighting of the narrower Nikkei 225. They lowered their forecast for this fiscal year to 1.1 percent from1.3 percent and for next year to 1.5 percent from 1.8 percent.
In a report on the economic outlook, the BOJ cut inflation forecasts for the next three years, projecting price gains of 1.1 percent in fiscal 2018, 1.5 percent in fiscal 2019, and 1.6 percent in fiscal 2020.
The new forecasts show the BoJ's struggle to stoke inflation, while its peers in the USA and Europe normalise policy.
The BoJ meeting that ends on Tuesday will be closely watched amid speculation the central bank might tweak its massive asset-buying programme and take a step towards less monetary policy accommodation.
"It seems that the BoJ would be happier to see long-term rates increase but it doesn't want to see a concurrent appreciation of the yen".
A revival in global growth may lift stocks even as tech shares stop leading the market higher, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston. The market's response to the new data indicates that other economic factors may play a more significant role in influencing the Yen's price movement. "Kuroda is serious about doing all he can to bring inflation up to acceptable levels on a sustained basis".