Instant View: Bank of Japan keeps rates steady, tweaks JGB buying plan

(Reuters) - The Bank of Japan kept its short-term rates steady on Friday while removing a reference to the amount of government bonds it has roughly committed to buying each month.

As widely expected, the BOJ maintained its short-term interest rate target at a range of 0-0.1%, which was set just a month ago when it made a historical exit from its massive stimulus programme.

MARKET REACTION:

Japan's Nikkei share average extended gains after the BOJ opted to leave interest rates unchanged. The benchmark index was up 1.06% to 38,028.78.

The Japanese yen fell sharply.

The benchmark 10-year JGB futures fell 0.19 yen to 143.96, but were off the day's lows.

COMMENTS:

MANSOOR MOHI-UDDIN, CHIEF ECONOMIST, THE BANK OF SINGAPORE, SINGAPORE

"The BOJ stayed dovish at its meeting by making no changes to interest rates or its QE-purchases of bonds. The decision supports Japan's equities and bonds, but provides little help for the yen."

NICHOLAS CHIA, ASIA MACRO STRATEGIST, STANDARD CHARTERED BANK, SINGAPORE

"Despite the knee-jerk dip in USD-JPY, the direction of travel for the pair is still north. Intervention risks become salient once the pair closes in on the 157-level, which may be a reason deterring more market participants from chasing USD-JPY higher.

"If the authorities do not step in at 157, then the sky is really the limit for the pair by signalling the all-clear for markets. All in, it is still a dovish meeting with repeated references to easy financial conditions despite the guidance to reduce bond purchases."

(Reporting by Asian bureaus; Compiled and edited by Vidya Ranganathan and Sherry Jacob-Phillips)