The Japanese yen closed noticeably higher today as the minutes of the Bank of Japan meeting in May showed that some policy members suggested limiting the term for quantitative easing.
The BoJ meeting revealed that the members of the bank’s Board believed that the economy will start to recover this year, but acknowledged that “there remained a high degree of uncertainty concerning the economy”. One of the policy makers suggested:
In a situation where it seemed difficult to achieve the price stability target in about two years, if a rise were to occur in markets’ anticipation that quantitative and qualitative monetary easing would continue for a protracted period or extreme additional measures would be implemented, this could lead to economic instability in the medium to long term, such as through a buildup of financial imbalances. On this basis, this member said that it was appropriate to change the expression representing the Bank’s commitment by stating that the time frame for continuing quantitative and qualitative monetary easing should be restricted to about two years, and that thereafter the Bank would review the monetary easing measures in a flexible manner.
It looks like any sign or reluctance from Japanese policy makers to QE pushes the yen higher. Traders were counting of monetary stimulus and do not want to central bank to stop with its easing program.
USD/JPY fell from 95.36 to 94.33, the lowest close since April 3. EUR/JPY declined from 127.51 to 125.88, the weakest settlement since April 5. GBP/JPY went down from 149.88 to 148.14, another close not seen since April.
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