The Japanese yen gained today after the Bank of Japan refrained from easing its monetary policy. Yet the central bank hinted that it may implement accommodative measures in the future, limiting gains of the currency.
The Bank of Japan left its main interest rate near zero after concluding its two-day policy meeting today. At the same time, the statement said that the bank “will pursue aggressive monetary easing in a continuous manner by conducting its virtually zero interest rate policy as well as steadily increasing the amount outstanding of the Asset Purchase Program”. The statement noted economic weakness both domestically and globally. The outlook was not particularly optimistic either:
Regarding risks, there remains a high degree of uncertainty concerning Japan’s economy, including the prospects for the European debt problem, the momentum toward recovery for the U.S. economy, the possibility of emerging and commodity-exporting economies making a smooth transition to the sustainable growth path, and the spreading effects of the recent bilateral relationship between Japan and China.
The bank’s decision to refrain from stimulus was expected by market participants, but it was bullish for the currency nevertheless. Yet traders still expect quantitative easing from the BoJ and such expectations weigh on the yen.
USD/JPY fell from 81.39 to 81.25 as of 5:58 GMT today, while its intraday low was at 81.12. EUR/JPY dropped from 104.29 to 103.99 and GBP/JPY went down 129.48 to 129.33.
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