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Asian Shares Gain as Bank of Japan Tweaks Monetary Policy

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In August markets were betting strongly that the benchmark federal funds rate would be lifted as Janet Yellen said she thought the time had come but new data seems to have changed the Fed Chair's view

The yen weakened sharply in late 2012 through 2014 but has since rebounded.

The yield on the 10-year Japanese government bond briefly rose above zero Wednesday for the first time since March after the Bank of Japan said it would introduce a 10-year interest-rate target, part of a new policy framework aimed at stoking inflation. The central bank is charging that rate on excess reserves it holds for banks to encourage them to lend more and said it might cut it further.

But it abandoned its base money target and instead adopted "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields at current levels around zero percent.

BANK OF JAPAN WATCH: Japan's central bank announced it was shifting its monetary policy to enhance its control of short-term and long-term interest rates. The newest 30-year note yielded 0.465%.

Under QQE, the BOJ has been increasing base money - or the amount of money it prints - at an annual pace of 80 trillion yen ($783 billion).

The sheer scale of its bond purchases have fueled worries that it will run into a situation where there aren't enough left for it to buy to meet its goals.

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The Nikkei was recently up 1% at 16662.27. It was widely expected to hike rates several more times this year, has held off as the USA economy sputtered, hobbled by weak global growth and a strong dollar that makes American goods pricier in foreign markets. It gained 19 cents to $44.05 a barrel on Tuesday.

The Finance Ministry said Wednesday that exports in August totaled 5.32 trillion yen ($52.4 billion), down 9.6 percent from a year earlier.

In bond markets, US Treasury yields spiked higher immediately after the decision, as investors apparently seem to believe the BOJ's move to steepen the yield curve will have a ripple effect on other bond markets.

CURRENCIES: The dollar jumped to 102.61 yen following the BOJ's announcement, from 101.62 yen in the previous session.

"They do seem open to fresh ideas. Keeping the depo rate at -0.1 per cent and not boosting asset purchases doesn't seem a recipe for yen depreciation", he said.

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