Fundamental Comment

Yen falls after BOJ, yet set for weekly gain

Yen falls after BOJ, yet set for weekly gain

The levels of the Japanese yen fell during today's trading against the dollar by 0.6%, after a meeting of the Bank of Japan, which witnessed the bank’s commitment to assess its easing monetary policy after the release of inflation data, which saw a decline at the fastest pace in a decade.

The dollar against the Japanese yen opened trading today at the level of 103.00, before reaching the highest level at 103.58. This comes after the great decline that the pair recorded since the beginning of the week to its lowest level since March at 102.86.

The decline of the Japanese yen came after the Japanese central bank kept key interest rates and the asset purchases program unchanged, while it worked to increase special support programs for companies affected by the Corona crisis for a period of six months to meet market expectations.

The BOJ stated that there was no need to change the monetary policy framework with regard to controlling the yield curve, in light of the ongoing quantitative easing process by the bank, and that this framework will not be included in the review and evaluation process that the bank will undertake.

This decision by the Japanese central bank came after the release of recent inflation data that showed the core CPI fell by 0.9%, the fastest pace of decline in more than a decade, adding pressure on Bank President Haruhiko Kuroda's ambitious program to generate a stable inflation path.

It is worth noting that the Yield Curve Control Framework was introduced in September 2016 after a comprehensive evaluation of the monetary policy. The framework has remained the same since then with only minor adjustments, and it has been closely examined by other global banks.

Inflation continues to contract at this pace, and the BOJ is concerned about how long inflation will remain below its 2% target, especially as with low interest rates worldwide, the gap between monetary policy and prices has become very large. 

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