USD/JPY Fundamental Daily Forecast – BOJ to Examine Ways “To Make Our Monetary Easing More Effective” – Kuroda

The Dollar/Yen is trading higher on Friday as investors booked profits ahead of the weekend and next week’s holiday-shortened week. The greenback appears to be taking a breather after enduring a week-long beating that has pushed it below major support levels as its slide sucked in more short-sellers keen to make a fast buck.

At 10:17 GMT, the USD/JPY is trading 103.540, up 0.464 or +0.45%.

Despite Friday’s early strength, the Dollar/Yen is still down about 0.5% for the week and had fallen below September’s low of 103.177 on Thursday.

Heading into the weekend, investors are focused on the progress of U.S. fiscal stimulus talks and Brexit trade negotiations to set the tone for the last weeks of the year.

Earlier in the session, the Bank of Japan extended its aid scheme for corporate lending and kept other policy settings steady, as expected. It also pledged to begin an examination on more effective ways to achieve its 2% inflation target.

BOJ to Look at More Effective Ways to Resolve Inflation Conundrum, Extends Fund Scheme

The Bank of Japan on Friday unveiled a plan to examine more effective ways to achieve its 2% inflation target, following in the footsteps of its U.S. and European peers as a renewed spike in infections threatened to derail a fragile recovery.

As widely expected, the central bank kept monetary policy steady and extended by six months a range of measures aimed at easing funding strains of companies hit by COVID-19.

In a surprise move, the BOJ said it will look at ways to make its policy “more effective and sustainable,” as the blow to growth from the pandemic pushes inflation further away from its target and forces it to maintain its massive stimulus longer.

BOJ Governor Haruhiko Kuroda said the review will be more fine-tuning of its market operations and asset purchases, rather than an overhaul of its yield curve control (YCC) policy.

But he said the central bank was open to introducing new tools and reviewing the way it buys exchange-traded funds (ETF) to address the potential side-effects of prolonged easing.

“We will examine operations under yield curve control and our asset purchases,” Kuroda told a briefing.

“It’s true this is an extraordinary policy for a central bank,” he said of the BOJ’s ETF buying. “It’s therefore necessary to examine ways to make this step effective and sustainable.”

The BOJ will announce the findings of the review in March.

Kuroda also said, “We won’t be weakening our monetary easing. Rather, we’re examining ways to make our monetary easing more effective.”

For a look at all of today’s economic events, check out our economic calendar.