Japanese Yen Falls on Monetary Policy Outlook, Tries to Recover

The Japanese yen fell intraday but reversed its movement afterward, managing to erase losses against a few of its rivals and trim them against others. The currency has been under pressure from the central bank’s loose monetary policy for a long time, and Japanese officials signaled today that it will not change anytime soon.
Bank of Japan Governor Haruhiko Kuroda spoke today, deflecting criticism that the central bank’s policy, including purchases of exchange-traded funds (ETFs), is behind the recent surge of stock prices, which may result in a bubble. He stated that optimism about COVID-19 vaccines and economic recovery fueled the rally of the stock market:

Optimism over the global economic outlook and steady vaccine rollouts may be behind the recent surge in stock prices.

He also warned that it is too early to be very optimistic:

But the global outlook remains highly uncertain.

As a result, he argued, the extremely accommodative monetary policy should remain in place, including the asset-purchase program:

Our ETF buying has had a positive impact on the economy and prices. We don’t have any plan to end or permanently reduce our purchases. We’ll look into ways to address (the side-effects) at our March review.

Also speaking today, Japanese Finance Minister Taro Aso said that G7 members agreed that it is too early to withdraw fiscal stimulus:

The biggest issue now is when to shift from crisis-mode policy to fiscal restoration. In doing so, it’s important for such action to be coordinated.

As for today’s macroeconomic data, Japan’s Ministry of Economy, Trade, and Industry reported that the Tertiary Industry Activity Index fell by 0.4% in December, whereas markets were expecting the same 0.6% rate of decline as in the preceding month. Year-on-year, the index dropped by 3.6%.
USD/JPY traded at about the opening level of 105.37 as of 10:02 GMT today after rising to the daily high of 105.63 earlier. EUR/JPY was up from 127.81 to 128.08, while its session maximum was at 128.27. CAD/JPY traded about flat at 83.34 following the earlier rally to the session high of 83.75.
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Original from: www.earnforex.com