Bank of Japan Maintains QE but Hints at October Stimulus Expansion

The Bank of Japan maintained its stimulus program of purchasing 80 trillion yen assets annually. The statement shows Japan economy continue to recover moderately but exports, output affected by slowdown in emerging economies. After the announcement, the dollar-yen fell below 120, by the dollar-yen rallied in the morning with a faint hope for expanding monetary stimulus, and weak Chinese stock market.

Kuroda, BoJ governor, said Japan’s economy continues to recover moderately.

China’s economy has recently slowed down, with mainly in the manufacturing sector. But it is expected to grow stably with support from the authorities’ fiscal and monetary measures.

As for prices, core consumer inflation is around zero and is seen staying flat for the time being. But the underlying trend of inflation is heightening steadily. QE is exerting its intended effect.

There’s absolutely no change to our view that we won’t hesitate to adjust monetary policy if there’s a change in the price trend and we think (further action) is needed to swiftly achieve our price target.

The USD/JPY fell to middle 119 after his press conference.

From Kuroda’s comments, my expectation is there wll be more QE happening after next month’s meeting as all oil prices/emerging market’s economy/exports industry continue to struggle in the coming months.

Ko Sato
Senior Market Analyst, OANDA Based in Tokyo, Japan, Ko Sato joined OANDA as a Trader in December 2010. With more than 10 years’ experience trading currencies, options, futures and other derivatives, he joined the MarketPulse team in November 2012. Ko writes both technical- and fundamental-based reports on various securities for MarketPulse’s Japanese website. He is a certified member of the Nippon Technical Analysts Association.