On Thursday, the Bank of Japan held rates steady despite a sharp surge in yen. Analysts believe the bank opts to wait until after the results of a British referendum next week that would roil global markets.
After a two-day review, the Bank of Japan announced Japan will continue to conduct the money market operations. This is to maintain the monetary base at an annual pace of 80 trillion yen ($760 billion) and to keep negative interest rates at minus 0.1 percent.
The decision grows doubts on the effectiveness of Prime Minister Shinzo Abe’s economic program. Abenomics hasn’t produced sustained or robust growth since it was launched three years ago. Since then, the second largest economy in Asia has swung between modest expansions and contractions.
"It is really interesting when you get a flat decision out of a central bank and you see these big market swings. This makes investing more difficult for investors," noted Macquarie division director Martin Lakos.
"Policymakers actually spend more time looking at equity markets than the actual yen, and if it does have a significantly negative impact on stocks, intervention risks picks up," said Mitul Kotecha, head of Asia FX and rates strategy at Barclays.
"In our view, the longer the board waits to address downside risks to the economy and prices, the more markets will question the central bank's commitment towards its inflation target," explained Izumi Devalier, economist at HSBC.
However, some of the central bank’s board members implied that they preferred to wait until after the U.K. referendum votes next week on whether to leave the European Union, according to people familiar with central bank’s strategies.