Bank of Japan – MPC Member Says Central Bank Prepared More Stimulus

Takehiro Sato addressed the Japanese business community earlier this week with a message of central bank readiness. He mentioned that the Bank of Japan is prepared to inject further stimulus into the economy if the economic recovery shows signs of a reversal. This sudden change in the direction might come about the increasing threats to global growth. Ironically the International Monetary Fund sees three major risks: The US Federal Reserve quantitative easing tapering program, the China economic slowdown and the Japanese monetary policies.

USD/JPY Weekly Forex Graph forJuly 26, 2013

The Bank of Japan is highlighting the US Fed and the Chinese economic risks as two of the major threats to the Japanese economy. On the local political front the weekend gave Shinzo Abe an expected win for his party the LDP and the coalition he leads. This vote of confidence is welcomed although due to the fact it is still the coalition that has the majority and not the LDP limits the scope of his “third arrow”. The third arrow in his approach to getting Japan out of two decades of stagnation is deep structural reform. Inflation is the major economic indicator to which to gauge recovery as Abe himself has put so much emphasis on it. He has pledged to increase inflation to 2% in a 2 year timeline. The timeline has been expanded. The Bank of Japan board is divided on the actual percentage and the timeline, but they are optimistic they can deliver somewhere close to that level.

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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