At some point, the BOJ is expected to slow the pace of JGB purchases, but with inflation remaining stubbornly below the 2 % target the BoJ maintains current policy guidance.
While currency concerns are not within the BoJ overall purview, but with risk perking up, the Yen’s near to medium term tangent will likely be determined by interest rate differentials. So, the BoJ was doggedly cautious to avoid any language that could be misconstrued as an adjustment in monetary easing.
I suspect the BoJ is a long way from adjusting policy and will like to err on the side of letting the economy and inflation overreach before tapering. Also, with Trump fiscal policies starting to materialise and the US economy picking up, the BOJ likely views the Fed raising rates twice in 2017, and if USDJPY firms above the 115 level, it may offer the BoJ more wiggle room for a more advancing policy stance later in 2017
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Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.