Japanese Yen Lower Before Bank of Japan Monetary Policy Decision
Talking Points – YEN, BANK OF JAPAN, MONETARY POLICY, FED
- The Japanese Yen barely reacted to mixed economic data releases for June
- BOJ possibly considering monetary policy adjustments in announcement today
- Fed, BOE rate decisions may drive Yen volatility via influence on risk trends
The Japanese Yen started Tuesday’s trading session cautiously lower against its US counterpart, as local economic data crossed the wires. June’s jobless rate was 2.4%, a slight uptick from both economists’ forecasts of 2.3% and May’s result of 2.2%. Preliminary industrial production data for June clocked in at -1.2%, lower than expected 0.6% and 4.2% prior. Year-on-year loans and discounts for corporations for last month were 3.17%, higher than the previous 2.56%.
USD/JPY 5-Minute Chart
Despite the mild reaction to the mixed economic data, the anti-risk currency faces potential volatility following the much-anticipated Bank of Japan rate decision and outlook report later today. Speculative chatter suggests that the central bank may adjust its large-scale stimulus initiative. Possible changes could be trimming its 80 trillion yen quantities easing program or tweaking yield curve control tolerance thresholds.
A change in the BOJ’s monetary policy could help Japanese commercial banks’ diminishing profit margins. Local lenders has suffered from the effects of a long-lasting stimulus program and low interest rates. The institutions could face more losses due to an increase in global borrowing costs. The United States Treasury announced on Monday that it will need to borrow up to $769b for the second half of this year, its largest amount needed since the 2007-2008 financial crisis. Such a move could send the US Dollar surging against the Yen and leave commercial bankers in danger of crisis.
Looking further ahead, the Japanese currency may be further impacted by market risk trends and a packed week of economic events. Most notably, monetary policy announcements are due from the US Federal Reserve and the Bank of England.
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--- Written by Megha Torpunuri, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.