The yen rose as the Bank of Japan held off from expanding its easing measures.
The currency also benefited from buying by investors who sought a safe haven from worries about corporate profitability in the US and slowing global growth. The dollar was at 79.312 yen, down from 79.743 yen late Wednesday.
In shifting tactics in its war on deflation, the BOJ on Thursday maintained the overall size of its centerpiece asset-purchase programme but said it would buy more short-term treasury bills to help meet its target for pushing liquidity into the market.
While most analysts expected the BOJ to stand pat, in light of improving economic conditions at home, recent easing moves by other central banks – including the People’ Bank of China and the European Central Bank – led to some expectations of fresh action. Earlier in the day, the Bank of Korea unexpectedly cut its benchmark interest rate by 0.25 percentage point to 3 percent.
The BOJ opted to keep its asset-purchase programme at JPY 70 trillion ($879.2 billion), but shift JPY 5 trillion from an underused fund offering fixed-rate loans and use it to more than double its purchases of the treasury bills.
Traders and analysts said though it fell short of a straightforward expansion of the BOJ programme, the move would help get more money into the market.
Brian Kim, a currency strategist at RBS Securities, said Japan’s central bank will have more incentive to embark on further easing if the currency rises toward 77 or 76 yen to the dollar.
BOJ governor Masaaki Shirakawa said the change was meant to ensure the BOJ meets its targets for asset purchases this year. “The BOJ is buying more assets every month, as it tries to expand the asset-purchase programme to JPY 65 trillion by the end of this year and to JPY 70 trillion by the end of June,” he said at a news conference after the meeting.
Having flooded the market with cash in its fight against deflation, the BOJ has been having trouble meeting its targets for loan provision and bond purchases at its recent operations.
The BOJ also decided to remove the minimum bidding yield – currently 0.1 percent – for buying of treasury discount bills and commercial paper, which will enable financial firms to sell the bonds to the BOJ at higher prices. But it held back from the bolder step taken by the ECB, which eliminated interest paid on commercial-bank deposits at the central bank.
The five-year government bond yield fell to a nine-year low of 0.175 percent following the announcement, while the 30-year yield briefly hit a month-low of 1.805 percent. The Nikkei Stock Average ended the day down 1.5 percent at 8720.01. -By MEGUMI FUJIKAWA And TATSUO ITO