BoJ Votes Unanimously to Hold at 0.5%

As expected, the Bank of Japan kept its key benchmark lending rate unchanged at 0.5%. Japanese stocks trader lower on profit-taking, after the Nikkei 225 hit a six-week high yesterday. The yen weakened slightly against the US$ to ¥119.15. Exporter stocks traded broadly lower, but selected financial stocks (including mega banks) which have lagged over the past year, posted gains. BoJ Governor Toshihiko Fukui said the bank is watching the effects of the Feb. hike. Regarding the yen carry trade, he commented, "... overall, we do not think the yen-carry trade will be resumed immediately." The BoJ also left its economic assessment unchanged, saying the nation's economy is "expanding moderately" and is expected to continue doing so. Most economists expect another BoJ rate hike after the July upper house election. As for the U.S. economy, Fukui said, "The U.S. slowdown is continuing, but we expect the economy's growth rate to return to potential after an adjustment, so a soft landing remains likely."

Sources: BoJ Decision [pdf] and Monthly Report, Bloomberg, Forbes XFN newswire
Commentary: BoJ's Tankan Shows Optimism Slips among Large Manufacturers; Stocks Drop • Japan: Chasing Yield in a Low Interest Rate World • BoJ to Maintain Accommodative Policy; Watching Real Estate Prices
Stocks/ETFs to watch: Mitsubishi UFJ FG (MTU), Mizuho FG (MFG), ORIX (IX), Toyota (TM), Sony (SNE), Canon (CAJ). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 Index (ITF), The Japan Equity Fund, Inc. (JEQ), CurrencyShares Japanese Yen Trust (FXY)

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