Talking Points:

  • Bank of Japan to Continue Growing Money Supply by ¥60-70T Annually
  • Banking Lending, Growth-Supporting Lending Facilities to be Extended
  • Japanese Yen Falls, Nikkei 225 Gains on Monetary Policy Announcement

The Yen declined after the Bank of Japan announced that it will extend its “Stimulating Bank Lending” and “Growth-Supporting Funding” facilities. The plan to increase the Japanese monetary base by ¥60-70T for as long as necessary, until Japan achieves a stable 2% inflation target, was left unchanged.Japanese equities rallied following the announcement with the Nikkei climbing over 3 percent.

The announcement follows yesterday’s disappointing GDP data, which showed the Japanese economy grew 0.4 percent in the fourth quarter, falling short of estimates calling for a 0.8 percent increase. Despite such sluggish performance and concerns that the upcoming sales tax hike will negatively impact household spending, the BOJ affirmed its upbeat assessment of the economy:

Japan's economy has continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed…With improvement in the employment and income situation, housing investment has continued to increase and private consumption has remained resilient.”

USD/JPY (5min Chart) - February 18, 2014

Yen_Falls_Japanese_Stocks_Rise_as_BOJ_Extends_Lending_Programs__body_Picture_5.png, Yen Falls, Japanese Stocks Rise as BOJ Extends Lending Programs

Created By Benjamin Du with FXCM Marketscope