BOJ Cites Need For Continued Easing

The governor of the Bank of Japan, Haruhiko Kuroda, today defended the BOJ’s intervention in FX markets last week. The BOJ was seen selling massive amounts of USD in its first such operations since 1998, in a bid to counter further depreciation of the Yen. Kuroda cited the need to conduct operations in this manner so as to allow negative rates to stay in place to help shore the up the economy.

Commenting at a business conference in Osaka, Kuroda explained that “The intervention was conducted by the finance minister’s decision as a necessary means to deal with excessive moves and I think it was appropriate.” In terms of the BOJ’s broader monetary policy, Kuroda explained that monetary easing was still required given that the bank deems the current cost-push inflation unsustainable, with price growth likely to fall back under the BOJ’s 2% target next year.

Looking ahead this week, the latest BOJ meeting minutes on Wednesday are likely to outlined the BOJ’s ongoing commitment to maintaining easing in the economy. With the BOJ committed to accommodative support, it is difficult to see JPY avoiding further losses aside from the safe-haven support we’re seeing as equities plummet on recession fears.

Technical Views

USDJPY

The USDJPY remains well within the bull channel which has framed the rally this year. The BOJ intervention has failed to produce a meaningful downside move and, while price holds above the 139.56 level support, the focus is on a continuation higher and an eventual break above the current 146.97 resistance.