YEN still affected by BOJ Policy
The activity over the last few years in the forex trading market, shows that there is still a very strong motion in regards to foreign currencies that are being traded against the Japanese Yen. The Bank of Japan (BOJ) is one of the central banks that is most active and it is very important to evaluate these factors in order to foresee which trends are most likely to dominate the Forex trading market in the upcoming months.
Evaluating the BOJ stances
3 years ago, in 2013 the Bank of Japan (BOJ) has released an announcement of their plan to launch an inflation target of 2%. After this was announced, the GDP of the country was improved by a mere 0.6% growth average. The BOJ believes that they have the necessary indication from the disappointing numbers to continue with their announced inflation target.
The quantitative and qualitative easing policy will most likely continue to be implemented by the central bank until the 2% inflation target is reached. However, there is no indication that this will occur in the near future. As it stands, BOJ introduce an interest rate of 0.0% earlier this year which is an increase from the previous interest rate of -0.1%. The Yen was expected to weaken as a result of the negative rates, however, the Yen has grown stronger due to exporters buying the Yen and returning it to Japan.
Changes were expected multiple times throughout the past 3 years from the Government, but to date the Government has not yet changed its progress. The BOJ is now expected to respond with extra ease in the economic policy as the inflation is not developing at a rapid rate as previously hoped. The stock market assets is also expected to increase by approximately five trillion yen by the BOJ. This is due to large Japanese corporations that has high liquidity and is currently not investing in their local community.
January’s negative rates has led companies to believe that the BOJ is running out of options. The negative interest rate was introduced to strengthen the economy, but this attempt of the central bank has failed. The current lack of confidence that Japanese corporations have in the country’s economy is due the decline that the rates have contributed to.
A 1.5% growth in GDP was forecasted in January but the BOJ but due to the change in Japan’s economy the BOJ has reduced the forecast to 1.2% growth. The central bank currently remains strong on its policy irrespective of the little improvement and this could negatively impact the JPY in the coming months.
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