The Japanese yen Weaken on Dovish BOJ Remarks

The head of the Japanese bank, Bank of Japan (BOJ) Governor Haruhiko Kuroda gave another “steady as she goes” speech. This sent the USD/JPY Forex market higher, as the yen weakened. This Forex market if back around ¥114.

Haruhiko Kuroda delivered a speech to Japanese central bank branch managers in Tokyo. He gave no hint that any departure from Japan’s current, loose monetary settings is even being contemplated. Mr. Kuroda said that the Japanese economy was “turning towards moderate expansion.” He expects this to continue. However, he said that the BOJ will maintain its current mix of ultra low interest rates, along with the expansion of the monetary base and control of the yield curve for as long as needed to achieve their target inflation rate. This is at two percent CPI and will be achieved “in a stable manner.”

There was no change of tone here whatsoever from any of his previous remarks.

Inflation is at a meager 0.4 percent. This means that the Japanese central bank still has much to do to meet its target inflation rate and then maintain it.

The Bank of Japan’s balance sheet is bloated by asset purchases. It is now at the point where it equals, if not excels, the country’s entire gross domestic product (GDP). Thanks to this, investors had hoped for a little detail on how the central bank might unwind its stimulus program. Especially when the time comes. There seems little chance of any unwinding at this point.

Japanese yen reacts to BOJ Words

This was another dovish speech from the BOJ Governor. Especially as there are expectations that the US Federal Reserve will trim its $34.5 trillion balance sheet this year. This helped support the dollar as the BOJ Governor gave his remarks.

The USD/JPY Forex market was back above the ¥114 pivot as his remarks became public. The yen was steady earlier despite mixed Japanese data. This included a shock contraction the ever volatile machine orders for the month of May.