BOJ Considering Next Move This Week

Bank of Japan policymakers will consider whether to ease monetary policy further when they meet later this week, as the yen’s strength and sluggish consumption weigh on inflation, sources close to the matter said Monday.

The two-day policy meeting from Thursday will take place amid market expectations that the BOJ will step up purchases of assets such as Japanese government bonds and exchange traded funds or push its interest rate for parking additional reserves further into negative territory.

Still, some within the central bank believe it needs to assess the economic impact of current monetary policy, the sources said.

Britain’s vote in late June to exit the European Union raised concerns about global economic growth, sending the yen sharply higher and depressing stock prices.

The dollar, which dipped below the 100 yen line for the first time in over two years in the immediate aftermath of the British vote, was trading around the mid-106 yen line in Tokyo on Monday. The yen is still relatively stronger than its levels a year ago, which could eat into Japanese exporters’ overseas profits and weigh on prices.

The government of Prime Minister Shinzo Abe, who decided earlier to delay the country’s planned consumption tax hike from 2017 to 2019, is drafting a stimulus package to support the world’s third-largest economy, raising market expectations that the BOJ will simultaneously ease its monetary grip.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza