USDJPY is falling on Monday; the Bank of Japan is trying to keep ahead of the game.
On Monday afternoon, the Japanese Yen is strengthening against the USD. The current quote for the instrument is 107.23.
Since the coronavirus “drama” didn’t have any new twists so far, the Japanese Yen is in demand as a “safe haven” asset. However, it’s not the only reason: The Bank of Japan announced new tools for supporting the country’s economy and they might work.
For example, during its April meeting, the Japanese regulator removed a limitation on buying government bonds and ramped up its purchases of corporate debt. In addition to that, the BoJ is planning to buy ETFs and J-REITs.
At the same time, it’s quite clearly seen that buying bonds may require the BoJ to keep their yields at 0%. All other tools are expected to work perfectly, on paper of course. For example, purchases of corporate debt may be up to $186 million (¥20 trillion) until September 2020 and that’s a great number.
It should be more convenient for commercial banks to resort to financing – financial flows are not expected to “stuck” anywhere. Moreover, the list of acceptable securities for loans from the Central Bank should increase. For example, private and household debts.
Why is it good for the Yen? The faster the Japanese economy recovers, the easier it will be for the Japanese regulator to form and control the national currency rate. The sooner the export recovers, the more money the country’s budget will receive and the influence of the national currency rate on the country’s economy will reduce.