BOJ’s Aggressive Stance Surprises

The Japanese Yen fell hard and broadly on Thursday following the Bank of Japan’s announcement of new and aggressive easing measures which took market players by surprise by their extent. The Bank of Japan’s newly installed governor announced that the bank intended to double their current bond and stock holdings within two years, with ¥7 trillion in bond purchases likely made per month, which is equivalent to 1.4% of Japan’s Gross Domestic Product. Markets had anticipated that the Japanese central bank would typically “under deliver” or fall far short of expectations but few anticipated that radical change in monetary policy.

As reported at 11:55 a.m. (JST) in Tokyo, the USD/JPY pair gained 2.5% to trade at 95.69 Yen and edging closer to last month’s 3½ year high of 96.71 Yen; analysts say that they expect the Yen to suffer further deterioration and that it is likely that pair could see a rise toward the 100 Yen level within the next several months. Analysts believe that investors are certain to be very wary of the Yen as the governor had said that further policy adjustments would be immediately considered as and when the situation warranted. The EUR/JPY pair had at one point traded 2.5% higher to 122.705 Yen before edging down to 122.09 Yen, nonetheless a gain of 2.15% for the Euro.