In the last few months, a whole host of economic indicators have confirmed both that the Japanese economy is on solid footing and that the era of deflation has finally passed. Accordingly, many economists and analysts predicted that Japan would soon end its ultra loose monetary policy where real interest rates where kept below zero. In the last few days, however, currency traders have been working overtime to rid their models lofty rate hike expectations. The cause of the uncertainty has been the Bank of Japan, itself, which has insisted that it will continue to hold short term interest rates to below .1%, and long term rates to a proportionately low level. The Financial Times reports:

Reports suggested the BoJ will continue to pump liquidity into the economy by buying Y1,200bn worth of government bonds a month to keep long-term rates capped. “This would help…reduce market turmoil, including speculative yen buying.”