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Japanese Yen Ticks Down, BoJ Opinions Show Stimulus Will Stay

Japanese Yen Ticks Down, BoJ Opinions Show Stimulus Will Stay

David Cottle, Analyst


Talking Points:

  • The summary of opinions from the BoJ’s June policy meet showed no sign of any stimulus exit plans
  • With inflation so far below target, it must be arguable that they were never going to
  • The BoJ is resolved to stick with extraordinarily loose policy

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The Japanese Yen was a little weaker against the US Dollar Monday following the release of a Bank of Japan report which showed that any exit from extraordinarily loose monetary policy remains a way off.

The BoJ’s “Summary of Opinions” from June 15 and 16’s policy conclave found rate-setters in broad agreement that the most effective way to hit the 2% annualized inflation target was to continue current policy.

It also said that private consumption appeared to be gaining momentum but that, while small and medium-sized firms were raising wages, generally higher wage levels remained elusive.

The Summary is released weeks before the actual minutes of a meeting. It gives markets a chance to assess the broad themes discussed. June saw no alteration in any of the BoJ’s settings and, indeed, was not expected to.

There had been some talk in local media about the possibility of at least a discussion about an “exit strategy” from some stimulus. The central bank’s balance sheet has been swollen by its own bond buying efforts to the point where it rivals Japan’s annual Gross Domestic Product.

However, while this is not a good look, with consumer prices rising by just 0.4% on the year it seems highly unlikely that exit strategies will be needed for the foreseeable future.

USD/JPY rose in the wake of the Summary’s release, but in truth there was nothing new here for markets. Investors are all-but certain that the BoJ will stick with its easing program into 2018 and probably beyond.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

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