Prophecies were fulfilled. The central bank commanded by M. Shirakawa pleased not only (the majority of) the domestic sectors' plea for a weaker yen, but also the broader consensus of the FX community. The BoJ finally moved to a higher 2.0% inflation target - now in line with other major central banks - and boosted its asset purchase program to an open-ended program. According to this new stimulus plan, the central bank will purchase assets worth about ¥13 trillion per month, comprised of about ¥10 trillion of Treasuries and some ¥2 trillion in Japanese Government Bonds (JGB). This expansion of the balance sheet is due to start in January 2014, as soon as the actual program finishes. Doubts remain, however, as to when the new inflation objective would be achieved, as the country needs to generate inflation expectations in households and companies as soon as possible.
… What lies underneath
However, the aftermath of the meeting left a bitter taste. Beyond this apparently new stimulus package, things look practically the same when we were netting out the effects of the announcements: the asset purchases throughout 2014 would remain at ¥10 trillion due to the current average maturities of the BoJ holdings of both JGBs and Treasuries, equaling the present year's pace of JGB purchases. There also was no surprise at the central bank's holdings of another 'riskier' assets, an issue that might be well considered as too cautious and in apparent conflict with the strong desire to reach the 2.0% inflation target.
This cautiousness by the BoJ might impact its much more needed credibility from market participants. Part of this lack of conviction can be seen in the market, where the Japanese yen has managed to gather some traction, appreciating to the area around 88.30, almost two big figures since Monday's tops in the vicinity of 90.30.
However, this correction lower in the USD/JPY was largely expected, and once the dust settles, further depreciation of the JPY could hinge on investor expectations in the ability of the BoJ to honor its promise.
In the technical space, expert Karen Jones at Commerzbank suggests:
"Near term we note the divergence of the daily RSI and this makes us wary of the up move. A move above 90.25/26 is needed to reassert upside pressure, while capped here a slide back to the up trends remains feasible. Our target remains 93.32 - the measurement higher of the triangle."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.