Thursday, February 14, 2013

BOJ Decision Ends 2-Day Yen Gain

Former BOJ Deputy Governor, Kazumasa Iwata, a potential candidate to become the next BOJ head, indicated earlier today that the Yen has scope to depreciate further. This set up a fall in the currency.
 
Iwata announced that the BOJ's price goal can't be reached, unless there is a correction in the strong Yen. He sees that the Yen at 90 to 100 per Dollar would be a point at which "equilibrium" is restored.
It's evident to me that the market's focus is shifting onto the BOJ and its policy under a new governor. Overall, I think that the market expects that the Yen will weaken further toward 100 Yen per Dollar, as hopes come to the fore that there will be further monetary stimulus.

The BOJ has rejected a proposal to keep interest rates almost at zero until a price target is decided on and has stopped short of adding to stimulus, at least until leadership changes are implemented in Mid-March.

The central bank is to kept its asset purchase fund unchanged, in line with majority analysts' expectations, at 76 trillion Yen ($813 billion).
 
In January, the BOJ doubled its inflation target to 2% and also pledged open ended bond purchases.

The Yen's losses remained limited though, ahead of a Group of 20 meeting that is set to start on Friday.

G20 member nations are expected to be especially critical of Japan for the recent declines in the Yen. Japan's currency has dropped 17% to the Dollar over the past three months.

Earlier today the Yen had lost 0.1% to 93.51 per Dollar and was little changed at 125.67 per Euro. The Euro bought $1.3439.