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Yen Sinks as BOJ Sets Inflation Target, Grows Asset Purchase Fund

Yen Sinks as BOJ Sets Inflation Target, Grows Asset Purchase Fund

2012-02-14 04:21:00
Ilya Spivak, Head Strategist, APAC
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TAKEAWAY: Bank of Japan expands stimulus measures, hints more of the same ahead > BOJ policy decision equivalent to an interest rate cut > Yen down

The Japanese Yen slumped against its leading counterparts after the Bank of Japan opted to expand its offering of stimulus measures. The bank expanded its asset-purchase fund to ¥30 trillion and set an inflation target of 1 percent.

In practical terms, the move amounts to an interest rate cut. The Bank of Japan is not able to issue an outright reduction in benchmark borrowing costs considering they are already effectively at zero (officially in the 0.0-0.1 percent range).

Expanding asset purchases is aimed at injecting more Yen into the markets to lower borrowing costs and boost prices in terms of the Japanese currency by diluting its supply. Setting an inflation rate goal of 1 percent when the latest data puts it at -0.3 percentof implies an intention to pursue further easing of monetary policy going forward.

Yen_Sinks_as_BOJ_Sets_Inflation_Target_Grows_Asset_Purchase_Fund_body_Picture_5.png, Yen Sinks as BOJ Sets Inflation Target, Grows Asset Purchase Fund

USDJPY Spot – Daily Chart. Created Using Marketscope 2.0, Prepared by Ilya Spivak

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow him on Twitter at @IlyaSpivak

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