BOJ Follows Through on Expectations

The Japanese Yen held onto earlier gains in the moments after the Bank of Japan made good on the widely expected move to increase stimulus, this time by hiking asset purchases an additional ¥10 trillion. The incoming prime minister had called for unlimited stimulus in order to achieve an inflation target of 2%, and the Japanese central bank had said that they would continue to review their monetary policy which has a 1% inflation goal with consideration of adopting a higher inflationary target.

As reported at 1:01 p.m. (JST) in Tokyo, the USD/JPY pair was holding at 84.14 Japanese Yen, nearly the same price as when the announcement first occurred, though about 0.3% lower than overnight trading in New York. The greenback had gained nearly 6% on the Japanese currency over the past few months as investors speculated that a new government would push for a much more aggressive agenda. Given that, movements in the pair had largely been priced in as evidenced by the 20-month peak struck on Wednesday when the pair hit 84.62 Yen. One Forex strategist in Tokyo suggested that a pre-Christmas sell-off was the reason. The EUR/JPY pair was also down about 0.3% trading at 111.32 Yen; on Wednesday the pair hit 112.59 Yen, a 16-month peak.