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Japanese Yen Looks Past BOJ as N. Korea Nuclear Deal Holds Sway

Japanese Yen Looks Past BOJ as N. Korea Nuclear Deal Holds Sway

David Cottle, Analyst

Talking Points:

  • The Bank of Japan left all its monetary policy settings alone, as expected.
  • Focus now turns as ever to Governor Kuroda who will meet the press shortly
  • The Yen was already weaker against the US Dollar as markets eye a nuclear deal with North Korea

Find out all you need to know before trading currencies including the Japanese Yen with the DailyFX Beginners’ Guide

The Japanese Yen was steady Friday as the Bank of Japan left its monetary settings alone, as had been universally expected.

That means that the key overnight rate says at -0.1%, the ten-year Japanese Government Bond Yield will be kept at 0% and that bond buying will continue to be JPY 80 trillion (US$300 billion) or so annually.

This was all precisely as the analysts had forecast, even if some market-watchers think that in the background, the BoJ may be more actively considering when to draw a line under its long period of extreme monetary easing. Japanese consumer price inflation is nowhere near the sustained, annualized 2% rate that the BoJ wants to see, but it is heading in the right direction.

On Friday BoJ said that Japan’s economy was still expanding moderately, and kept all of its growth and inflation assessments unchanged. The decision to maintain current control of the government bond yield curve was taken once again with the dissent of board member Goushi Katoka, who remains doubtful that the 2% inflation target can be sustainably met without yet more monetary easing.

Governor Haruhiko Kuroda was reappointed last month for an unprecedented second consecutive term at the helm. He has already mused aloud about the possible withdrawal of stimulus next year if inflation continues to rise. This is probably a bigger ‘if;’ than the Yen’s subsequent strength would suggest however, especially if global growth starts to flag.

Focus will now turn to Kuroda’s traditional post-decision press conference which is coming up at.

On its daily chart USD/JPY remains stuck in the well-respected downtrend channel which has marked trade since early January. However, it has staged a modest bounce in the past week, at the 105.21 area which was March 2’s low. News of possible nuclear rapprochement between North Korea and the US Friday may further weaken demand for the Yen, which is usually seen as the haven currency, in demand when risk appetite is skittish.

However, given the clear trend toward general US Dollar weakness it may be wise to wait and see if this bounce can consolidate above the downtrend line before committing to it.

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--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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