On the eve of the Bank of Japan’s policy setting decision, the Japanese Yen’s recent selloff came to a screeching halt during the Asian trading session, as investors decide to wait and see if the central bank would follow through on what many analysts believe will be an aggressively loose monetary policy or if they will disappoint yet again. As reported at 11:11 a.m. (JST) in Tokyo, the USD/JPY pair was trading at 89.63 Yen, coming off of Monday’s peak of 90.25 Yen, a level not seen in about 2½ years. Over the course of the last six weeks, the U.S. Dollar has gained a staggering 10% on speculation that the new Japanese government’s goal to restore the Japanese economy, the third largest in the world, to better health will exert undue pressure on the central bank.
However, analysts caution that the Bank of Japan’s track record has disappointed markets before and that investors should steel themselves for a buy the rumor sell the fact type of event. They expect that the Yen will remain under pressure only if the BOJ commits to meeting a 2% inflationary target through open-ended asset purchases; even with an inflation target any cap on asset purchases is likely to give the Yen a chance to rebound.
Investors Await BOJ Decision
Barbara Zigah