(Recasts, adds details, fresh quote)
* BOJ scraps monetary base, targets long-term rates
* BOJ's Kuroda says Japan no longer in deflation
* Fed seen standing pat, could hint at hike this year
By Anirban Nag
LONDON, Sept 21 The yen recovered from lows on
Wednesday, with investors sceptical about whether the Bank of
Japan latest measures will be enough to generate inflation, with
many also cautious about the dollar before the Federal Reserve's
Japan's central bank, overhauling its massive stimulus
programme, decided to scrap its focus on monetary base and set
targets for long-term rates. It also committed to an overshoot
of its elusive 2 percent inflation target.
The BOJ maintained the 0.1 percent negative interest rate it
applies to some of the excess reserves that financial
institutions park with the central bank.
But it abandoned its base money target and instead set a
"yield curve control," under which it will buy long-term
government bonds to keep 10-year bond yields around current
levels of zero percent.
The BOJ's measures gave a boost to global risk sentiment and
banking stocks and added to downward pressure on the safe-haven
yen, which tends to do well during times when financial markets
comes under stress.
But the yen bounced back to trade broadly steady against the
dollar and the euro in the European session.
"The announcements likely won't eradicate the scepticism in
the market over the BOJ's ability to achieve its inflation goal
through additional easing," said Derek Halpenny, European head
of market research at Bank of Tokyo Mitsubishi.
"The strengthening of the inflation goal by now seeking an
overshoot is all well and good, but if there is deep doubt over
reaching even 2 percent, there will be even greater doubt over
achieving an overshoot. So there is nothing in today's
announcement to make us turn suddenly yen bearish.
The dollar, which rose more than 1 percent to a one-week
high of 102.79 yen, fell to trade at 101.75 yen, broadly
unchanged on the day. BOJ Governor Haruhiko Kuroda's upbeat
comments on the Japanese economy also helped the yen.
The euro, which had surged to 114.36 yen, was
trading at 113.50 yen, only slightly higher on the day. Traders
said the fact that BOJ took action to boost inflation was a
surprise to many who had doubts that the central bank had much
left in its arsenal.
"Many people expected the BOJ not to take any action at all,
and the yen to strengthen, so we now see many people buying the
dollar back," said Kaneo Ogino, director at foreign exchange
research firm Global-info Co in Tokyo.
Investors' attention will now shift to the Fed. The U.S.
central bank is widely expected to hold interest rates unchanged
at 0.25 percent to 0.50 percent, and could hint at a rate hike
by the end of the year.
Weaker-than-expected U.S. economic data has prompted
investors to call off bets for a Fed rate hike on Wednesday.
On Tuesday, data showed U.S. housing starts fell more than
expected in August as building activity declined broadly after
two straight months of solid increases.
(Addtional reporting by Lisa Twaronite; Editing by Tom