The Bank of Japan had been held in high regard the world over, given its seeming ability to tweak and control monetary policy to fit its need;, however the recently released report which shows Japan’s 3rd quarter growth failing by a wide margin to meet even modest expectations, has shocked the investment world, suggesting perhaps that their faith in the BOJ might have been misplaced. Japan’s Cabinet Office had reported that annualized 3rd quarter growth fell to -1.6% against expectations of a rise to 2.1%, while growth quarter-over-quarter was reported at -0.4% against an excepted rise to 0.5%; essentially the world’s third biggest economy has once again slipped into a recession.
As reported at 9:09 a.m. (GMT) in London, the USD/JPY was trading at 116.16 Yen, near the mid-point of the day’s trading range, but the pair had edged up to 117.01 Yen shortly after the news was reported. The EUR/JPY was trading at 145.2435 Yen, falling from a session peak of 146.4786 Yen. The U.S. Dollar Index edged up 0.5% to trade at 87.569 .DXY, slipping off a session high struck earlier in the day.
BOJ in Focus
The Japanese Yen recovered after the initial shock as investors assess that this news could force the Japanese government’s hand; many expect that the Bank of Japan will likely pull out the heavy ammunitions after this week in order to put the economy back on track. A snap election is also likely to be held in the days ahead, putting additional pressure on the BOJ and thus, the Yen.