The Bank of Japan delivered a comprehensive monetary easing program, which includes Fed style guidance and a much wider bond buying scheme. The new governor Kuroda met the huge expectations built up for long months.
USD/JPY leaps over 150 pips conquers 94. Resistance at 94.46 is close. Yen crosses are jumping as well. Update: the pair already crossed the 95 line as European traders extend the rally and already crossed 95.50.
Here are the details:
- The BOJ will now JGBs which mature in up to 7 years, from 3 yearrs earlier. The BOJ will increase the monetary base at an annual rate of 60-70 trillion yen. Eventually, also JGBs will include buying 40 year bonds.
- The policy will continue until the 2% inflation is reached in a stable manner. This quantitative and qualitative monetary easing is similar to the Fed’s guidance.
- The BOJ will also terminate its asset buying and lending program and bring forward the timing of open ended asset buying.
- The bank note rule will be suspended temporarily. This means that the central bank will now be able to hold more government bonds than those in circulation. The BOJ said that the decision to buy more JGBs was unanimous.
Simon Smith said yesterday that the BOJ can do a lot to weaken the yen. Indeed, they did a lot and the yen is weaker.
The Japanese government has welcomed the decision. Finance minister Amari also said that the BOJ has exceeded most expectations in its measures to achieve the price goal in 2 years. They are probably happy with the new weakening of the yen, but will not comment on the exchange rate.
BOJ governor Haruhiko Kuroda will hold a press conference soon.
The live chart below clearly shows the big leap. For more on the yen, see the USD/JPY forecast.