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The Japanese Yen Slowly Recovers After BoJ News

By:
Barry Norman
Updated: Aug 25, 2015, 00:00 UTC

The Japanese yen continues to gain momentum pushing down the US dollar to trade at 107.81 after breaching the 110.00 level just a short while ago. Just

The Japanese Yen Slowly Recovers After BoJ News

The Japanese Yen Slowly Recovers After BoJ News
The Japanese Yen Slowly Recovers After BoJ News
The Japanese yen continues to gain momentum pushing down the US dollar to trade at 107.81 after breaching the 110.00 level just a short while ago. Just days ago the Bank of Japan held rates and policy and yesterday the Bank of Japan monetary policy minutes were released giving traders a look at the thinking of the committee. Bank of Japan board members agreed that exports remained weak and a few of them were cautious about a sustainable rise in exports, the minutes of the bank’s Sept. 3-4 policy meeting released Friday showed. Despite sluggish exports and factory output, the nine-member board still believed that the positive domestic cycle from income to spending was in place in both the household and corporate sectors, and that Japan’s economy was likely to “continue its moderate recovery trend,” overcoming the drag from the April sales tax hike. The EURJPY gave up a few points as the euro recovered to trade at 107.81. Looking ahead, the BOJ board shared the view that exports were likely to head for a “moderate” increase as overseas economies recover, they said.

Exports have turned out to be weaker than many BOJ officials had expected for cyclical and structure reasons: Global growth has been slower than forecast and they underestimated the impact of manufacturers moving their production overseas to compete in global markets amid the falling working population in Japan. At the September meeting, the BOJ left its quantitative easing programme unchanged despite some weakness in household spending.

At a subsequent meeting this week the BOJ kept policy unchanged and lowered its assessment of industrial production. Christine Lagarde, the head of the International Monetary Fund, has warned that the eurozone is displaying the symptoms of Japan’s longstanding economic problems and needs fresh moves to avert the threat of recession.

USDJPY(60 minutes)20141010064220

IMF
With the IMF’s annual meeting in Washington likely to be dominated by the failure of Europe to emerge from the financial crisis of six years ago, Lagarde dropped a broad hint that she wanted Germany to run down its budget surplus to boost growth. She said there was a “serious risk” of a recession in the eurozone if nothing was done to avert a new downturn. Asked if the eurozone was the new Japan, a country that has never fully recovered from the financial crash at the end of the 1980s, Lagarde said: “We have alerted to the risks of persistently low inflation, which was one of the attributes of Japan.

Speculation is growing that the ECB will adopt quantitative easing – the money-creation programme used by the US Federal Reserve, the Bank of England and the Bank of Japan – over the next few months. The euro recovered on Friday morning to trade at 1.2696 after breaking the 1.27 level on Thursday as the US dollar gave up some of its strength. The US dollar fell to 85.63 after hopes of an early interest rate increase were pushed farther out. The FOMC minutes released on Wednesday seemed to think that the committee would put off interest increases until later in 2015.

 

 

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