The Bank of Japan, (BOJ) is headquartered in the Nihonbashi business district in Tokyo. The BOJ is the Japanese central bank, which is responsible for issuing and handling currency and treasury securities, implementing monetary policy and maintaining the stability of the Japanese financial system.

Interest rates set by the BOJ typically share a positive correlation with Japanese Government Bond Yields meaning when interest rates fall, yields of Japanese Government Bonds decline in lockstep and vice versa.

Recently, there is one news that have been waiting by the traders and it is the setting interest rates in the country. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation. The Bank of Japan left its key short-term interest rate unchanged at -0.1% and kept the target for the 10-year government bond yield at around 0% during its October meeting by an 8-1 vote, as widely expected.

Other than that, policymakers mentioned that tight supply-chain is the factor of exports and output are weakening. In a quarterly outlook report, the central bank slashed its projected rates of the GDP for the current FY to 3.4% from earlier forecasts of 3.8% made in July, amid the impact of COVID-19 on services consumption.

In conlusion, a higher than expected rate is positive/bullish for the JPY, while a lower than expected rate is negative/bearish for the JPY.

Source : Trading Economics