Unlike most of its counterparts, the dovish Bank of Japan said it would maintain an ultra-loose monetary stance this year.

Governor Haruhiko Kuroda presented a list of events scheduled for 2023. He said the central bank would continue with monetary easing to bring inflation to the 2% target in a stable manner and trigger wage growth. Analysts increasingly anticipated that the Bank of Japan would begin tightening due to the highest inflation in a decade. However, the bank’s decision came contrary to market expectations. Perhaps the Japanese regulator will change its rhetoric at some point but not now. 

This year, the Japanese economy will likely show fairly stable growth despite uncertainty caused by inflation and the COVID-19 pandemic, Kuroda stressed.

Notably, the Japanese yen skyrocketed on growing signs of the BOJ’s hawkish pivot. However, when the reality fell short of expectations, the USD/JPY pair plummeted to its 7-month low, below 129.