The Japanese yen remained weak today even as the Bank of Japan refrained from expanding already substantial monetary accommodation. At the same time, policy makers signaled that they are going to keep existing monetary stimulus for the time being.
The BoJ kept the size of asset purchases at ¥60–70 trillion on today’s meeting. The central bank was unexpectedly positive regarding the current state of Japan’s economy, saying:
Japan’s economy continued to recover moderately, and a front-loaded increase in demand prior to the consumption tax hike has recently been observed.
Policy makers also expressed optimism about the future developments:
With regard to the outlook, Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the front-loaded increase and subsequent decline in demand prior to and after the consumption tax hike. The year-on-year increase in the CPI, excluding the direct effects of the consumption tax hike, is likely to be around 1.25 percent for some time.
At the same time, the bank signaled that it is going to keep policy accommodative until its inflation target is reached:
The Bank will continue with quantitative and qualitative easing, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner.
The yen kept its yesterday’s losses even after the policy announcement. Yet it looks like the currency may yet rally as it erased today’s drop and is moving to the upside right now.
USD/JPY traded at 103.27 as of 3:43 GMT today after opening at 103.25 and rising to 103.41. EUR/JPY traded near the opening level of 142.28 following the rise to 143.42. GBP/JPY was at about 171.88, trimming the rally from 171.86 to 172.10.
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