The Japanese yen is almost unchanged on Wednesday, as USD/JPY trades in the mid-119 range. On the release front, the BOJ released its policy statement, with the BOJ saying that it would maintain its accommodative monetary stance. Later in the day, Japan releases Trade Balance. In the US, it’s a busy day, with the release of Building Permits and PPI. The highlight of the day is the Federal Reserve minutes.
There were no surprises from the BOJ policy statement, as the central bank said that it would continue to increase base money by 80 trillion yen/year. With inflation sagging and well short of the BOJ’s 2% target, the central bank has little choice but to continue its accommodative monetary stance. The divergence with the Federal Reserve, which is expected to raise rates, will likely continue to weigh on the Japanese yen, which is again flirting with the symbolic 120 level.
Japanese manufacturing data started the week on a positive note, as Revised Industrial Production gained 0.8%, bouncing back from a decline in the previous release. This was within expectations, as the estimate was 1.0%. Last week, Japanese Core Machinery Tools jumped 8.3% in December, its strongest gain since March. This easily beat the estimate of 2.4%.
The markets are keeping a close eye on the Fed minutes, which will be released later on Wednesday. With the US economy showing strong growth and positive employment numbers, there are widespread expectations for a rate hike as early as the summer. Any hints regarding a hike could provide a strong boost for the US dollar against its major rivals.
USD/JPY 119.36 H: 119.41 L: 118.88
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