The Bank of Japan met earlier today for its monthly monetary policy meeting. It was decided to leave monetary policy unchanged including both interest rates as well as its QQE program steady at 80 trillion Yen. However, one member from the BoJ, Kiuchi proposed that the Central Bank cut down on its QQE or stimulus expansion by almost half, to 45 trillion Yen a year. The proposal was voted down by a majority of the members.
The Japanese Yen was muted to the event largely as a result of lack of any action or initiative from the BoJ. The BoJ’s inaction was widely expected as most economists were of the view that the BoJ would hold on to its policy at this meeting, but there is a rising speculation that the next policy meeting due on April 30th could post some risks with the possibility of further easing on the horizon.
However, in this case it seems unlikely at the moment as Oil prices, both the WTI and Brent have managed to lift off from what seems like a bottom of the decline. The largely stabilizing prices in Crude Oil could possibly help inflation to pick up in the near term. WTI Crude oil has managed to lift off from the lows of $42 to trade above the $50 handle for the past few days.
The Central Bank, in its statement noted that the Japanese economy would continue its moderate recovery but that inflation could persist at near zero levels for the medium term.
While the Yen initially strengthened as a knee-jerk reaction, the currency soon stabilized as it weakened considerably across the board. AUD, CAD, NZD were seen gaining ground against the Yen, while the USD, GBP and Euro saw a more muted reaction to the Yen, trading within a range with noticeable movements in price.
Markets look to the FOMC Minutes
With the BoJ’s monetary policy decision done with, markets now look towards tonight’s FOMC meeting minutes. With the US Dollar suffering a sell off since the monetary statement released earlier in March followed by a weak jobs report as well, the FOMC minutes will be closely scrutinized. Although the minutes date back to previous month, where the Fed did not have any latest data such as the March jobs report, any further dovish hints in the minutes could further fuel a selloff in the Greenback.
It should be noted that along with the monetary policy statement, the Fed also released its economic projections, all of which were revised downwards and this perhaps could offer some early clues into what to expect at the release of the minutes later tonight.
The Greenback failed to hold on to its gains after showing signs of reversal near highs of 98.10 and is now trading below 97.8. If the bearish momentum keeps up, the US Dollar Index could possibly test the next support down to 96.42.
