As is well known, the government of Japan has been embarking on a scheme, which included both monetary and fiscal policy, which would hopefully result in economic growth. To that end, the Bank of Japan has made numerous attempts to ensure that the Japanese Yen is weak enough to promote growth through trade. However, the safe haven status of the Yen has generally driven the currency higher as global uncertainty rises. Nonetheless, one economic adviser to Prime Minister Shinzo Abe had said earlier that additional stimulus was likely not needed in the near future, and that the Bank of Japan’s 2% inflation target remained in sight. Etsuro Honda also suggested that the BOJ might begin reining in its Quantitative Easing plans, which has grown massive over the past few years.
As reported at 11:32 am (BDT) in London, the USD/JPY pair was trading at 123.9775 Yen, just a few pips from the session low; the pair had earlier hit a peak of 124.1250 Yen. The EUR/JPY was higher at 136.1120 Yen, a gain of 0.21%.
Sales Tax Hike to come under Scrutiny
According to the Japanese official, however, the Bank of Japan will need to gauge a planned rate hike in the sales tax that is due to take place next year. The Japanese government raised the sales tax in 2014 and had been worried about the impact. Indeed, plans to increase the rate this year were postponed after Japan slipped into a recession. If enacted, the April 2017 sales tax increase would raise the rate to 10%.