Bank of Japan still on the accommodative side
|During the night, the Bank of Japan has announced its rate remain on hold. It is certain that the Bank of Japan was also closely looking towards the Fed which had its meeting yesterday night. The US central bank has announced a reduction of its balance sheet which is providing some relief to the USDJPY. Indeed, the currency pair has surged above 112.
Markets will now start pricing the end of the Quantitative Easing. The big unknown is how will react the global bond markets as higher yields would likely trigger a sell-off which can be massive as free money kept flowing into this market during the last decade.
Stay on top of the markets with Swissquote’s News & Analysis
The BoJ is going to continue its all-in monetary policy by buying assets at around Yen 80 trillion a year. This can definitely not end well. Some BoJ members believe that the inflation target of 2% is too high for the current monetary policy which is, in definite, not loose enough. For the time being, the BoJ maintains its 10-year government bond target around 0 percent.
Against the backdrop of the US balance sheet reduction, we consider that the USDJPY is set to appreciate towards 114 within the short-term.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.