Mixed JPY as BoJ statement overlooked

Swissquote Bank Research Team Swissquote Bank Ltd

Recent monetary policy meeting statement made by the Bank of Japan (BoJ) had a muted reaction on the marketplace. The yen is in positive territory as traders are cutting their positions ahead of Japanese Golden Week in anticipation of any potential flash crash risk while the stock index Nikkei 225 closed the day up 0.48%. Without much surprise, the central bank kept its policy rate unchanged, expressing concerns regarding economic and prices outlook amid current global economic developments. However, the BoJ provides more details on the period during which ultra-loose monetary policy should remain, stating a minimum one-year time period after continuously asserting “for the intermeeting period” in prior declarations.

Yet despite the fact that the central bank is expected to maintain the pace of current JGB purchases at JPY 80 trillion ($715 billion), leave 10-year JGB yield flexible along 0% and implement further mechanisms including a lending exchange-traded funds of JPY 6 trillion ($53.65 billion) or an easing of collateral lending conditions, it becomes clear that the BoJ is coming to the end of its sleight of hand after all. The publication of the BoJ quarterly outlook report also confirms that the 2% inflation target won’t be reachable before 3 years and that inflation should reach 1.10% this year. There is therefore little upside potential for the JPY to expect, except in a broader risk-off event.

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Currently trading at 111.86, USD/JPY is expected to rebound, heading along 112 short-term.

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Swissquote Bank Research Team

Swissquote Bank Ltd

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