More Easing Expected From Bank Of Japan (BOJ)

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Numerous rumors have been floating around for the past few weeks on further easing by the Bank of Japan in the upcoming rate meeting, October 30.  As a matter of fact, today’s Japanese Press report stated that:

(JP) BOJ planning to conduct more easing and increasing asset purchases at the next meeting on Oct 30 in the tune of $250 Billion Dollars…

…which helped the USDJPY pair breach the 80.00 level briefly, although the denial from the newly appointed Minister of Finance Jojima drove the pair down immediately, as he said:

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    • No truth to reports that Government is requesting BoJ to increase asset purchases by ¥20T
    • To continue to call on BoJ to pursue powerful monetary easing to achieve 1% inflation goals.
    • Downside risks to Japan economy is growing.
    • It is urgent to accelerate efforts to beat deflation and help the economy.

And not to disappoint the market too much, the economic minister of Japan Maehara chimed in by stating that it is  the government’s position for BOJ to pursue powerful easing measures, and if time permits, he would attend the next BOJ meeting….

So how to interpret these headlines?

I guess it is the same with every central bank, they do not want to appear under pressure, but at the same time they want to give the illusion of transparancy.  With BOJ, it is particularly difficult because of the Japanese culture and the self-imposed limit on bond purchases, which sometimes keep the market on its toes.   With the diplomatic tension with China on the rise and the recent decline in the Japanese economy, I believe BOJ is more likely to ease in this upcoming meeting than ever, especially considering that:

  • U.S. Federal Reserve has launched QE3 with unlimited scope.
  • EU ECB has launched OMT with unlimited scope.

This will be a race between the most developed economies in the world, to see who can depreciate their currencies faster.  I believe JPY will weaken from now until the meeting, so my bias is definitely on selling JPY on rallies.  The way that I see both EURJPY and GBPJY, I think they have potentials of breaking recent ranges…

Another interesting pair to look at is the CADJPY pair, which I believe with today’s BOC Rate Statement, puts the pair at a perfect fundamental position to move upwards.  Of course, the short-term market might not follow the fundamentals right away, but it is always a good bet for the long term… I believe we could see the 84.00 level for CADJPY by the end of the year, or early 2013.

 

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

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