USD/JPY Fundamental Daily Forecast – BOJ Summary Shows Policymakers Debated Near-Term Stimulus

A summary of BOJ policymaker opinions showed they debated the feasibility of ramping up stimulus in the near future when they met for a rate review in September as escalating overseas risks clouded the economic outlook.
James Hyerczyk

The Dollar/Yen is trading slightly lower on Monday despite firmer Treasury yields and a slight increase in demand for risky assets. The price action suggests investors are already preparing for this week’s U.S. Non-Farm Payrolls report on Friday that could determine whether the Federal Reserve makes another rate cut later in the month. If this is true then we’re likely to see a sideways trade this week.

At 07:57 GMT, the USD/JPY is trading 107.844, down 0.096 or -0.09%.

Last week, the Dollar/Yen rallied as investors shrugged off the political turmoil in Washington after the House Democrats opened an impeachment inquiry on President Trump. Helping to support the dollar against the yen were less-dovish comments from Federal Open Market Committee (FOMC) members, who said the economy may not need the Fed to be so aggressive with its easing policy. This suggests the Fed may hit the pause button on rate cuts at its October 29-30 meeting.

Also helping to weaken the Yen was speculation the Bank of Japan (BOJ) was preparing to hit the economy with a rate cut and possibly additional stimulus when it makes its policy announcements on October 31.

BOJ Summary of Opinions

A summary of BOJ policymaker opinions showed they debated the feasibility of ramping up stimulus in the near future when they met for a rate review in September as escalating overseas risks clouded the economic outlook.

The BOJ Summary of Opinions of the September 18-19 policy meeting also showed that some on the nine-member board stressed the need to communicate to markets the central bank has all options on the table including cutting interest rates, increasing asset buying and printing money at a faster pace.

“There is a significant chance the economy will lose momentum to hit our price target. As such, we should consider whether or not to take additional steps,” one member was quoted as saying. “The BOJ needs to consider all possible policy measures without preconception,” the member added.

Another board member said it was important for the BOJ to communicate to markets it has not run out of policy options, and that “any kinds of measures are possible at all times.”

Daily Forecast

The BOJ Summary of Opinions indicates the central bank is stuck between a rock and a hard place. Years of heavy stimulus has failed to ignite inflation and left the central bank with few ammunition to fight the next recession.

Furthermore, aggressive BOJ policy such as prolonged ultra-low rates have also strained financial institutions’ profits. Last week, BOJ Governor Haruhiko Kuroda said he wouldn’t rule out deepening negative rates, but this move could push some regional banks into financial trouble.

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.