EUR/JPY Fundamental Forecast – May 2, 2016

The EUR/JPY dipped 56 points as the yen continued to gather momentum after the BoJ held rates and policy upsetting traders on Thursday. Japan is on holiday today for Showa Day. The pair is trading at 122.19. The latest BoJ surprise has left analysts confused as to the central bank’s thinking.

Some accept Kuroda’s explanation that the Japanese central bank is simply waiting to see the effects of its previous stimulus. “We have kept monetary policy on hold this time while the effects of quantitative easing with a minus interest rate set in”, Kuroda explained yesterday. “Those effects don’t appear in a month or two but I don’t think It’ll take as long as six months or a year.”

But others believe that the BoJ’s decision to hold fire is a tacit concession by the Japanese central bank that it has run out of ammunition.

The Japanese central bank is already buying nearly ¥80 trillion ($970 billion) in assets each year, which has left it owning nearly one-third of the massive Japanese bond market. In addition, Bloomberg estimates the BoJ’s purchases of exchange-traded funds have made it a top 10 shareholder in 90 per cent of the Nikkei 225 Stock Average.

But neither the Japanese central bank’s massive asset purchases, nor its decision to embrace negative interest rates, have budged Japan’s stubbornly low inflation rate.

Kuroda vowed to nurture a 2 per cent inflation rate within two years when he took the helm of the BoJ three years ago. But he’s been forced to push back the deadline for achieving his target.

In March, the Japanese parliament confirmed the appointment of Haruhiko Kuroda as governor of the BoJ. He quickly vowed to do “whatever [the bank] can to lift Japan out of the state of deflation that has sapped spirits and stifled investment for most of the past 15 years”.

Just a month later, Mr Kuroda announced aggressive buying of long-term bonds aimed at doubling the monetary base over two years and achieving Mr Abe’s 2 per cent inflation target by 2015.

In October 2014, the BoJ tried another dose of shock and awe and cranked up its monetary easing program. Then in January this year, Mr Kuroda surprised markets when he cut interest rates to minus 0.1 per cent.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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Monday, May 2, 2016

Government Bond Auctions

Date Time       Country           Auction

Mar 02 13:00 Norway Details of bond auction on Mar 04

May 04 11:05 Norway Holds bond auction

May 04 11:30 Germany Eur 4bn Apr 2021 Bobl

May 04 11:50 France Holds bond auction

May 04 17:20 Sweden Details of bond auction on May 11

May 05 10:30 Spain Holds bond auction

May 05 11:00 Austria Holds bond auction