Inactivity of the Bank of Japan and the US Fed, as well as uncertainty associated with the forthcoming referendum on the exit of the UK from the EU and increasing demand for safe-haven assets, such as gold and the Yen have triggered the rise in the pair USD/JPY to the annual lows of 103.55.
Following the decision of the Bank of Japan to continue current monetary policy in the country, Japanese stock index Nikkei Stock Average fell by 3.1% up to 15434.14 points at the end of yesterday’s Asian session, closing at the lows since 12 February. The pair USD/JPY fell to 104.15. At the European session the pair fell to 103.55, reaching the lows since September 2014.
At the press-conference, which was held after the meeting, the head of the Bank of Japan, Mr. Kuroda said that the Bank would not hesitate to take additional easing measures if necessary, awaiting that inflation would reach the target level in the fiscal year of 2017.
Strengthening in the Yen raises concern of the country’s government, as strong national currency impedes economic growth and inflation in the country, and is also unfavourable for Japanese exporters. Today, Japanese Finance Minister, Mr. Taro Aso said that the government should prevent further rise in the Yen, which he believes, are unilateral, sharp and speculative. He promised to take stricter measures than before if necessary.
The Bank of Japan and the US Fed did not take any actions prior to referendum in the UK. Probably, the Bank of Japan will not interfere in the currency market fearing unnecessary spending of foreign currency reserves in the event the exit of the UK from the EU. According to some economists, in this case, the pair GBP/JPY may fall to the level of 133.00 (from the current level of 148.00), and GBP/USD will go to 101.00 (from the current level of 104.00).
Apparently, until the release of the results of the referendum in the UK on 23 June, the demand for gold and the Yen as safe-haven assets will continue. The pair USD/JPY will remain under pressure. Upward correction in the pair will be limited. It is likely that the pair will move in the range of 103.50 – 105.00.