On Thursday afternoon, USDJPY is moving downwards; the Japanese regulator’s monetary policy remained unchanged.
The Japanese yen is rising against the USD on Thursday. The current quote for the instrument is 111.99.
The Bank of Japan had another meeting this morning. The rate decision was no surprise as it remained unchanged at -0.10% as expected. In the comments that followed, the regulator said that interest rates wouldn’t change at least until spring 2020. At the same time, the regulator understands that it has to take measures intended to soften its monetary policy in the future.
Major predictions of the Bank of Japan barely changed. In 2019-20, the regulator expects the Consumer Price Index at 1.1%, in 2020-21 – at 1.4% (revised downwards from 1.5%), and in 2021-22 – at 1.6%.
Right now, the inflation is a very good indicator of what is happening in the Japanese economy due to the regulator’s “ultra-soft” monetary policy. The deflation that took place for many years were defeated only thanks to massive injections of money into the country’s economic system and the Bank of Japan understands is perfectly. At the same time, it is not an option to let the system operate by itself, because the deflation may come back and damage the economy much worse. The only thing Japan can do is to support the economy and wait for the moment when internal drivers are able to “pull” it by themselves. Obviously, it will take much more time than was expected earlier.
This morning, the Yen got stronger against the USD and the BoJ’s rhetoric was one of the reasons for that.