The Bank of Japan changed the focus of its monetary policy, targeting the yield curve while becoming less strict regarding the inflation target, JGB buying, and other measures.

The interest remains at -0.1%, unchanged. They show more flexibility but focus on the yield curve: they do not want it to flatten. Regarding ETF purchases, they will focus on Topix-tracking ETFs, resulting in a positive move in the Topix stock index.

The level of QE is more flexible and they loosened previous buying restrictions.

USD/JPY initially higher

When stock markets rise, USD/JPY usually follows. USD/JPY reacts with a rise to 102.70. The move to the upside is contrary to forecasts released; that saw a win-win event for the Japanese currency. However, things can change later on. The high so far is 102.78.

The next line of resistance awaits at 103.40, followed by 104.20. Support awaits at 101, followed by the round level of 100.

While they celebrated the “victory” against deflation, the BOJ seems less eager to reach the 2% inflation target. They accept that low energy prices are good for the economy and decided to stop getting worried about it.

BOJ Governor Kuroda will hold a press conference later on. He will explain the new policy, which followed a review of the QQE policy, initially introduced back in April 2013.

There is another central bank gathering on the other side of the day: the FED. This will naturally also impact the pair.

Here is the FOMC Preview: Dollar Depends on Door to December

Here is how the move looks on the USD/JPY chart: