Earlier in the Asia session the BoJ announced the results of its latest policy meeting. It was a largely a non-event for the market as expected, with the bank maintaining the status quo by keeping its easing program at 80 trillion a year by an 8-1 vote. The bank did announce that it plans to release a summary of the gathering around a week after its policy meetings which it plans to reduce to 8 a year from 14.
The market reaction to the news was fairly minimal, both the yen and Nikkei are holding fairly steady. USDJPY has found some sticky ground around 123.00 as it waits for direction and the Nikkei has been stifled lately by the reduced prospect of further easing from the BoJ. Stronger than expected growth numbers and mildly improving inflation figures have cast doubt about the need for further stimulus in the near-term, although it’s very early days and inflation is still a long way from the BoJ’s target; the market needs more guidance and will be closely watching Japanese economic data.
One to watch: NZDJPY
It’s no secret that the kiwi has been performing horribly lately due to a sharp deterioration of NZ’s rate outlook. A string of soft data releases has pushed the RBNZ to cut interest rates and keep the door open for further rate cuts. In fact, the release of very soft Q1 growth numbers earlier this week greatly increased the likelihood of more rate cuts. Seasonal adjusted GDP grew a measly 0.2% last quarter, completely missing an expected 0.6% expansion, as primary industries activity fell 2.9%; lower dairy production and softening activity in the mining sector are to blame. Also, business investment expenditure was very soft.
This sell-off in the kiwi has pushed NZDJPY to long-term trend line support (see chart). A break here may confirm a bearish H&S pattern, suggesting further weakness in the long-term. The pair is also getting very close to its yearly low; beyond here eyeing 83.40 and then 81.50. However, NZDJPY is looking oversold on sometimes frames and we cannot rule out a retracement in the near-term.