Japanese stocks down, yen steady as markets brace for landmark BOJ shift

investing.com:

By Ankur Banerjee

SINGAPORE (Reuters) — Japanese shares fell on Tuesday along with regional markets, while the yen was steady heading into a pivotal Bank of Japan meeting that could end eight years of negative interest rates and usher in the nation's first policy tightening since 2007.

In a week filled with central bank meetings across the globe, the BOJ takes the spotlight on the day with all signs pointing to the central bank shifting away from its ultra easy monetary policy.

The BOJ is widely expected to set the overnight call rate its new target and guide it in a range of 0-0.1% by paying 0.1% interest on excess reserves financial institutions park with the central bank.

The central bank may also ditch its bond yield control and discontinue purchases of risky assets such as exchange-traded funds, sources have told Reuters.

Japan's Nikkei was 0.73% lower, while Japan's 10-year government bond yield rose on Tuesday and the yen was rooted at 149.26 per dollar ahead of the decision.

«The focus of today’s (BOJ) meeting should not be on the rate decision itself but on its forward guidance,» ING economists said in a note. 

«If the BOJ signals really slow and cautious steps ahead, then the market is likely to be disappointed. There is a slim chance that the BOJ expresses a hawkish tone in its guidance, in which case, the market reaction could be quite substantial for the yen and Japanese government bonds.»

Analysts also point to caution ahead of the Federal Reserve's policy decision on Wednesday and on possible tweaks by the central bank to its projection of rate cuts for the year.

Dollar/yen traders are looking more intently at the Fed meeting, and potential changes in the 'dot plot', as a volatility driver, according