USD/JPY and the BoJ adding another dimension

By FXStreet FXStreet (Guatemala) – Last week, markets were taken by surprise on the BoJ’s move when they announced it would adopt a negative discount rate. The implications of doing so are not only damaging to the Yen in the immediate term, but this should be alarming to the financial world in the essence that key global authorities are preempting a worsening global outlook and are taking radical actions to help prorogue the headwinds.

“The BoJ called the move “adding another dimension” to its policy tool box, which analysts at ANZ noted the Central Bank now has three dimensions: quantity (money base increase at JPY 80trn per annum); quality (asset purchases – principally JPY 80trn/per annum JGBs, also JREIT and ETFs); and now, negative rates. “The two main reasons why the BoJ has done this are: first to force financial institutions to either lend out or invest in risky assets any money that they receive from selling JGBs to the BoJ under the QQE, and second, to extend the life of its current easing policy given its inflation goal is proving elusive.””

USD/JPY knee jerk could be short-lived medium term

The immediate effect has seen a sharp fall in the Yen. The Yen …read more

Source:: FX Street