As widely expected, the Bank of Japan held its benchmark interest rate target at 0.5%, unchanged since February. BoJ Governor Fukui reiterated the bank's gradualist approach to adjusting rates, saying it wants to review more data and be more confident about the outlook for the economy. The Nikkei rallied 0.7% to 17,971, reaching 18,000 intra-day, while the broader TOPIX rose 0.9% to 1,772.94. The US$ was last trading at nearly 123.50 against the yen, more than a 4.5 year high. Bloomberg reports 11 of 17 analysts it polled expect a rate hike in August after the upper house Diet election July 22 and following the release of Q2 GDP and the BoJ's quarterly tankan business confidence survey. In its monthly report, the BoJ commented the domestic economy is "expanding moderately" and it expects it continue doing so. The BoJ will release its latest meeting minutes next Wednesday before the market opens. Its next monetary policy meeting is July 11 - 12.
Sources: Bank of Japan I [pdf], II, Associated Press, Bloomberg
Commentary: Scotia Capital: Japan's Monetary Policy Key For Global Equity Performance • What Will Unwind the Carry Trade? • Lichtenstein's Steel Partners Wants More Japanese Companies
Stocks/ETFs to watch: Mitsubishi UFJ FG (NYSE:MTU), Mizuho FG (NYSE:MFG), ORIX (NYSE:IX). ETFs: iShares MSCI Japan Index (NYSEARCA:EWJ), iShares S&P/TOPIX 150 Index (ITF), CurrencyShares Japanese Yen Trust (NYSEARCA:FXY)
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