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Official concern over pace of decline helping to dampen JPY weakness - BTMU

FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, notes the comments made late last week from Japanese Finance Minister Aso expressing concern over the speed of yen’s decline last week appear to be having some success in the near-term at dampening yen weakness.

Key Quotes

“The yen has weakened sharply since the BoJ announced accelerated monetary easing at their meeting on the 31st October. After the BoJ’s easing announcement USD/JPY has increased at its fastest pace over a similar time period since early 2009 rising by close to 10% to the recent peak.”

“The minutes from the BoJ’s meeting on the 31st October were released overnight revealing diverging views over the need for additional easing which was expected given that only a slim majority (five out of nine members) voted for easing.”

“Some members believed that the benefits of more easing were not worth the costs, likely having only a small effect on expectations. Some members also expressed concern that additional easing would add to the risk that the BoJ is seen as financing government spending and would further squeeze liquidity in the JGB market.“

“However, many members pushed for further monetary easing to pre-empt falling inflation expectations which could delay the end of the deflation mind set in Japan.”

“BoJ Governor Kuroda has also spoken overnight to business leaders in which he emphasized that “the most important point I want you to understand with regard to the expansion of QQE is that the bank strongly commits itself to achieving the price stability target of 2% at the earliest possible time and maintaining it in a stable manner”.“

“He reiterated that the BoJ will continue to make adjustments to monetary policy without hesitation as needed. noting that the conversion of the deflation mind set is steadily progressing.”

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