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USD/JPY rises on Kuroda's speech - BTMU

FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ notes USD/JPY was lifted following BoJ governor Haruhiko Kuroda's speech overnight, in which he reiterated commitment to aggressive monetary policy stance until inflation target is reached.

Key Quotes

"The 0.7% advance for USD/JPY so far today reflects the speech by BOJ Governor Kuroda who emphasised the determination of the BOJ to carry through with its current aggressive monetary stance until the goal of price stability is achieved. In comparing Japan to a sick patient, he stated that symptoms (deflation) would only get worse if the full course of medicine (monetary easing) was not taken."

"Judging from Kuroda’s comments on the sales tax we would also hazard a guess that the decision to act pre-emptively was in part down to the desire to encourage the government into implementing the second sales tax increase – a decision PM Abe will make some time after the release of real GDP data for Q3 on 17th November. By stating that regaining lost confidence if the sales tax increase is delayed would be difficult, it is clear where Kuroda believes the risks lie. There could well have been a deal already hatched on this and it seems likely that the second sales tax increase will be implemented as planned in October 2015."

"Governor Kuroda also stated the inevitable that the BOJ action was not taken to weaken the yen. He did however, play down the negative impact on the yen, saying depreciation was a net benefit."

"The BOJ action and today’s comments certainly will only reinforce the market view that USD/JPY potential upside from here remains significant. As we stated on Friday, nobody was expecting the BOJ action and very few were therefore positioned for it."

"Non-Japanese speculative market participants are therefore looking to increase long positioning and dips are likely to be shallow and brief from here. The current declines in global commodity prices, in particular oil, will also limit the potential for political rhetoric from Tokyo indicating discontent with the move."

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