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The Bank of Japan voted 8-1 to hold its target interest rate at 0.5%, sending the yen lower against the dollar and euro, while late selling pushed the Nikkei down 0.4% to fall below 18,000 for the first time in ten sessions. Global-Central-Bank-Rates-chart-07-12-07 The BoJ's pause was widely expected, especially ahead of parliamentary elections on July 29, but some were surprised by only one dissenting vote (Atsushi Mizuno). In January, Mizuno and two others voted unsuccessfully for a hike, but the following month the BoJ doubled its benchmark rate to the since unchanged target of 0.5%. BoJ Governor Toshihiko Fukui said policy makers are confident in their outlook of the economy, but want to examine more data, referring specifically to Q2 GDP, which will be released the week prior to its next meeting (Aug. 22 - 23). A majority of economists still expect an August rate hike. In its monthly report, the BoJ said the economy is expanding moderately and is expected to continue doing so.

Sources: Bank of Japan I, II (.pdf), Bloomberg
Commentary: BoJ's Nishimura Warns Against Pausing for Too LongJapan: PM Adviser Suggests Diversifying Foreign ReservesJapan: Nomura's July Individual Investor Survey
Stocks/ETFs to watch: Mitsubishi UFJ FG (MTU), Mizuho FG (MFG), ORIX (IX). ETFs: iShares MSCI Japan Index (EWJ), CurrencyShares Japanese Yen Trust (FXY)

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Source: BoJ Holds Again at 0.5%; Hike Still Expected in August