The Bank of Japan votes for no change by a majority of 7-2. USD/JPY rises 40 points.
The BoJ has held fast as expected. (see below)
*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED Votes 7-2 to keep policy unchanged
Keeps 10-yr JGB yield target at ~0%
Will keep expanding monetary base until inflation exceeds 2% – Source
The main take-outs were as follows,
* BOJ RAISES ECONOMIC ASSESSMENT< * BOJ: JAPAN’S ECONOMY CONTINUES TO RECOVER MODERATELY AS A TREND< * BOJ MAINTAINS PLEDGE TO BUY JGBS AT CURRENT PACE SO BALANCE OF ITS HOLDINGS INCREASES AT ANNUAL PACE OF 80 TRLN YEN< * BOJ: REVISES UP VIEW ON EXPORTS, OUTPUT< * BOJ: EXPORTS, OUTPUT PICKING UP< * BOJ: JAPAN ECONOMY LIKELY TO TURN TO MODERATE EXPANSION< * BOJ: RISKS TO OUTLOOK INCLUDE DEVELOPMENTS IN US ECONOMY, IMPACT OF US MONETARY POLICY ON GLOBAL MARKETS
Unsurprisingly they have upgraded the outlook for exports given that USD/JPY is 10% higher (ie JPY weaker) since Mr Trump’s elections victory. Even more unsurprisingly, they say that “developments” (read the new President) in the US economy and higher US rates create uncertainties in their outlook. No argument there!
USD/JPY certainly likes it initially as this gives a big green light for the US/Japan yield gap to continue upwards. (assuming Mr Trump and the Fed do what they say they’ll do) looking back on 2016 making assumptions turned out to be a dangerous thing but this decision should put a floor on USD/JPY over the years end.
Looking at the hourly chart for some short term inspiration, we have some resistance at the days’ highs at 117.57, some definite congestion around the 118.00 level and then previous hourly highs at 118.40 area.
About Jeffrey Halley
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia. Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.
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