Bank of Japan to Pursue Easing

By TraderVox.com

Tradervox (Dublin) – The Bank of Japan had earlier this week avoided discussion on the additional stimulus issue making the market to lean on speculations that the BOJ was not pursuing the stimulus efforts. However, the Bank of Japan Governor, Masaaki Shirikawa came out strongly yesterday claiming that the BOJ will “pursue powerful easing” to avoid deflation. This led the yen to fall for the second consecutive day against the dollar and the euro.

The statement from the Governor came hours after top currency officials in Japan warned that delays in efforts to improve the country’s finances would hurt the country’s economy. Japan’s Prime Minister is grappling with the biggest public debt burden in the world and quick measures should be taken to ease the situation. Strategists had warned that last year’s strengthening of the yen was not helpful to the economy hence the BOJ needed to be seen to be ready to do what is necessary to ensure that the yen was kept weak against major currencies.

This seemed to spur the BOJ governor to act, and after his remarks the yen fell against 16 major currencies. This also came as the Federal Reserve Vice Chairman Janet Yellen indicated that the US interest rate will be kept low, which deterred the demand for safe haven currencies. The euro increased against the yen as investors prepare to buy Italy bonds amounting to 5 billion Euros. The Australian dollar rose against the yen after a report showed that employment rose by more than it had been anticipated.

Geoff Kendrick when asked to comment on the yen stated that the market is keen on the BOJ and there is strong expectation for easing. He also stated that people are looking at the Italian auction and if it does not live up to expectation the euro will be sold en masse.

The yen weakened against the euro by 0.3 percent to trade at 106.34 yen per euro while it declined by 0.3 percent against the US dollar to exchange at 81.09 yen per dollar.

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