Forex top mover of the week: USD/JPY

 

USD/JPY is the top mover at -3.58 per cent (-3.786 points) this trading week. This was mainly due BOJ officials not being too committed on further monetary stimulus, was far less than what the market was anticipating, causing a rally in yen. BOJ Imperial Shogun Kuroda also made it clear during that implementing some form of so-called “helicopter money” was out of the question, saying that “Advanced economies, including Japan, do not conduct monetary and fiscal policies as a set.

Kuroda did say that that the BOJ plans a comprehensive monetary policy review during the September policy meeting. But “Whether that will affect monetary policy decisions will depend on what the outcome of the assessment will be,” according to Kuroda. Kuroda also added that “We’re not announcing this based on an assumption that we will do something on monetary policy. I am aware some central banks do pre-announce monetary easing. We don’t do such a thing.” This comprehensive monetary policy review is therefore not a guarantee that the BOJ will be easing further in September.

In addition, the yen also got a bullish boost across the board on Tuesday which was likely due to Finance Minsiter Taro Aso's statement that the Japanese government has not yet decided on the size of Japanese PM Shinzo Abe’s planned fiscal stimulus package, which created uncertainty on the effective of the planned stimulus package, as well as dampening expectations that the BOJ will introduce some form of monetary stimulus.

With little to show for three years of massive monetary easing, economists say BOJ governor Haruhiko Kuroda's "comprehensive assessment" of policy could push it into closer cooperation with Prime Minister Shinzo Abe, who announced a fiscal spending package worth more than 28 trillion yen ($275 billion) on Wednesday in a bid to kickstart growth.

"The comprehensive review might be the first step toward further collaboration with the government, hinting at helicopter money," said Daiju Aoki, economist at UBS Securities.

"The government could issue 50-year bonds, and if the BOJ makes a commitment to hold them for a very long time, that would be like helicopter money."