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Possibility of further BoJ monetary easing to weigh on the yen in the near-term - BTMU

FXStreet (Łódź) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ suggests that the JPY will remain under pressure in the near-term as the continued unsatisfactory performance of the Japanese economy may lead to further policy easing by the BoJ.

Key Quotes

"The yen is beginning to derive more support from the deteriorating outlook for global growth which is prompting more risk averse trading conditions in the near-term. However, the weak performance of the Japanese economy following the sales tax hike is keeping alive investor expectations that the BoJ may accelerate monetary easing which remains a weight on the yen in the near-term."

"At today’s monetary policy meeting the BoJ left their monetary policy stance unchanged remaining committed to increasing the monetary base by JPY60-70 trillion in 2014. In their updated assessment of the economy, the BoJ signalled more concern over recent weakness particularly on the production side following the sales tax hike."

"Industrial production is no longer described as increasing moderately as a trend. Board member Shirai objected to the description that inflation expectations 'appear to be rising on the whole' saying instead that they’re on 'an upward trend from a somewhat longer-term perspective'. The ongoing shift to a more bearish outlook at the BoJ appears to be too gradual to expect accelerated easing in the near-term."

"There has also been more speculation that a majority at the BoJ is seen in favour of making the time frame over which they intend to reach their 2.0% inflation target more flexible. A Bloomberg report today has stated that a majority of board members are in favour of ditching the two-way time frame at some point. A more flexible time frame would potentially dampen pressure on the BoJ to ease monetary policy further in the near-term and as such could provide some support for the yen."

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