Is the BOJ's monetary policy adjustment really just a tweak?

The Bank of Japan made seemingly moderate adjustments to the monetary easing policy framework at its monetary policy meeting of July 30-31 and even described the adjustments as a "strengthening" of the framework with an adoption of the forward guidance on policy rates.

The 10-year bond yield has begun to exceed 0.12 percent from the following day, but so far the BOJ successfully avoided a sharp stock fall and a sharp appreciation of the yen — suggesting that the market did not view these adjustments as a less dovish stance. In fact, the BOJ skillfully introduced a few elements that could lead to steps toward normalization of Japan's monetary policy.

First, the BOJ introduced the 10-year "target range" of plus and minus 0.2 percent (-0.2 percent to +0.2 percent) from the previous target range of plus and minus 0.1 percent. The new target range was mentioned by BOJ Gov. Haruhiko Kuroda at a press conference on Tuesday, while the previous target range used to be inferred by market participants through the levels of fixed rates chosen by the BOJ in conducting unlimited bond purchase operations.