USDJPY Falls As the Japanese Yen Rallied on 2.2 Trillion Stimulus

The USDJPY currency pair was trading down over 50 pips as the US dollar remained weaker than the Japanese yen. The positive sentiment towards the yen was not dampened by the Bank of Japan’s Governor Haruhiko Kuroda’s statement that it was too early to start thinking of exiting the BoJ’s easy money policies.

The outgoing Governor said the country had not yet reached a sustainable inflation target. Kuroda said it was too early to start discussing a path out of the easy money policies championed by the Bank of Japan over the past few years.

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The yen remains one of the biggest beneficiaries of the recent drop in the US dollar as investors scale back their expectations for future Fed rate hikes. Most people now think that the Fed may be at the end of its current tightening cycle and may have to slash rates by the end of the year. 

Investors seem to have accepted that the BoJ is not in a hurry to raise interest rates after former BoJ board member Makoto Sakurai said that “the fall in bond yields and more stable yen affords incoming Bank of Japan governor Kazuo Ueda time to consider modifications to yield curve control.”

Sakurai added: “no change is likely before July as policymakers monitor domestic and global growth and the outcome of wage negotiations. The new governor Ueda knows he will lose everything if quick action spoils the economy and prices.” 

Therefore, the new governor “will slowly go ahead with policy tweaks after properly ascertaining the outlook for the economy and prices, including the outlook for a virtuous cycle between wages and prices.”

Furthermore, the Japanese yen was boosted by comments from Japan’s Ecnomy Minister Shigeyuki Goto said, “we are going to use budget reserves to pay for a stimulus package worth 2.2 trillion yen.” The country will continue stimulating its economy. 

Japan’s Prime Minister Fumio Kishida reiterated that the government was actively monitoring developments in the banking sector and the general stability of Japan’s financial systems. The Japanese government is keen to reassure investors and consumers of the stability of its financial system and the overall economy. 

*This is not investment advice. 

The USDJPY price chart.

The USDJPY currency pair was trading down 54.2 pips (0.42%) as the dollar rallied against the yen.