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Yen Soars as Bank of Japan Leaves Monetary Policy Unchanged

Yen Soars as Bank of Japan Leaves Monetary Policy Unchanged

Daniel Dubrovsky, Contributing Senior Strategist


Talking Points

  • Bank of Japan maintains policy balance rate at -0.10% as expected
  • Japanese Yen gains versus its major peers, Nikkei 225 futures tumble
  • Lack of further stimulus expansion clues likely inspired risk aversion

Having trouble trading the Japanese Yen? This may be why.

The Japanese Yen strengthened across the board and Nikkei 225 futures tumbled amid risk aversion as the Bank of Japan left monetary policy unchanged. The central bank voted 8 to 1 to keep its monetary base target unchanged at ¥80 trillion yen. While economists were not expecting the BOJ to adjust its monetary policy heading into the announcement, investors have speculated on greater easing since last week, delivering the largest one-day Yen drop in 18 months.

Bank of Japan members stated that their 2017 fiscal year outlook for core CPI is 1.7 percent and 1.9 percent for 2018. The committee forecasted that CPI will hit the 2 percent target some time in 2017 and retail prices should remain 0 percent for the time being. With the BOJ giving no clues towards any imminent easing, the markets appeared to respond to the news with risk aversion.

Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing a reading of 2.0 following the announcement, meaning that for every trader short the USD/JPY, there are 2 on the long side. The SSI is a contrarian indicator, implying further USD/JPY weakness ahead.

Want to learn more about the DailyFX SSI indicator? Click here to watch a tutorial.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.