Japan's central bank, Bank of Japan, unexpectedly announced new monetary easing measures to support the recovery of the Japanese economy. The immediate consequence of the move was that the dollar approached a one-month high against the yen.
The move by the BoJ comes after the one by the Fed which last week decided to buy Mortgage Backed Securities for 40 billion usd a month. Dollar climbed to 79,19 yen on decision, from 78,83 recorded yesterday in Wall Street close. The cross is now at 79,15. The Monetary Policy Board of the Central Bank of Japan has decided to increase the scope of the asset purchase program, bringing it up to 80.000 billion yen from 70.000 billion yen and to remove the minimum yield threshold of 0,1% for bond purchases government and corporate.
The Bank of Japan has also decided to extend the program deadline until the end of December 2013. In the days leading up to the BoJ meeting, analysts were divided on expectations. “Whether the dollar's gains trigger a sustained trend will depend on the monetary policy outlook. In other words, it will depend on the intentions of the governor, Masaaki Shirakawa, whether or not to undertake the Japanese version of the Fed's open-ended program,” noted Tsunemasa Tsukada of Mitsubishi UFJ Trust and Banking. Yuji Kameoka, head of FX at Daiwa Securities, said that “the easing of the BoJ so far has not created a downtrend on the yen, despite the Board has decided to increase liquidity in the market. This may weaken the yen up to a point, but it shouldn't create a sustained trend,” concluded the expert. Japanese Finance Minister Jun Azumi welcomed the BoJ's move, declaring that the decisions taken have gone beyond the government's expectations and underlining that they will support the country's economy.
