Japanese Yen to Consolidate Further Ahead of Next BoJ Meeting

by Joe Oliver, Forex Trading-Pips

 

The US$ traded lower in a consolidation pattern against the Japanese yen for a second week with pair trading just above par at 100.47 Yen for 1 US$ on Friday. Brendan Conway of Barrons reports:  
 

The International Monetary Fund just shot something of an arrow over the bow of Japan’sAbenomics. Short version: The yen is weak enough already, maybe even too weak. So you can stop devaluing right here.

A senior official outlined what’s clearly intended as a qualifier to the IMF’s support of Japan’s aggressive new monetary policy, support which until now sounded pretty much unqualified. From Reuters’ Stanley White and Tetsushi Kajimoto:

The yen’s depreciation since last year has left it slightly below a level consistent with Japan’s medium- to long-term economic fundamentals. a senior International Monetary Fund official said on Friday.

David Lipton, the first deputy managing director of the IMF, said the yen’s current depreciation is not problematic if accompanied by fiscal and structural reforms Prime Minister Shinzo Abe has promised to deliver.

Lipton also said the yen and the current account balance should move to levels consistent with economic fundamentals as fiscal and structural reforms, which are part of a package dubbed “Abenomics,” are put in place.

Previously, the IMF had said that the yen was moderately overvalued. The change in tone shows that while the IMF now thinks that yen weakness has gone a little too far, it expects this trend to correct itself over time.

“We appreciate that the attempt to escape deflation has had an effect on the exchange rate and our assessment is right now that leaves the exchange rate moderately below what would be consistent with medium-term norms,” Lipton said.

…More at IMF Warns Japan: Yen is Weak Enough

 

David Song, Currency Analyst Daily FX on USD/JPY:

The_Japanese_Yen_body_Picture_1.png, Japanese Yen to Consolidate Further Ahead of Next BoJ Meeting

Japanese Yen to Consolidate Further Ahead of Next BoJ Meeting…

The Japanese Yen gained ground against its U.S. counterpart even as the Bank of Japan (BoJ) pledged to increase the frequency of its Japanese Government Bond (JGB) purchases, but the pullback in the USDJPY is likely to be short-lived as the central bank carries its easing cycle into the second-half of the year. However, as the central bank moves to the sidelines, the USDJPY may continue to consolidate ahead of the next policy meeting June 11, and the pair may threaten the bullish trend from earlier this year amid the mixed batch of commentary coming out of the world’s third-largest economy.

As the BoJ wants to avoid excess volatility on the bond market, the central bank said it will purchase the region’s public debt 8 to 10 times a month starting June, while International Monetary Fund Deputy Managing Director David Lipton sees a ‘high chance’ for the central bank to achieve the 2% target for inflation as it takes a more aggressive approach in shoring up the ailing economy. Despite growing support for the BoJ, board member Ryuzo Miyao struck a rather neutral tone for monetary policy and said that the central bank has taken all the necessary steps for the time being, while Economy Minister Akira Amari warned about the adverse effects of the easing cycle as Governor Haruhiko Kuroda takes unprecedented steps to address the risks surrounding the region. At the same time, Japanese Finance Minister Taro Aso argued rising JGB yields may negative implication for Japanese lenders while speaking in front of parliament, and we may see the BoJ face increased scrutiny over the near to medium-term as it retains a qualitative/quantitative approach for monetary policy.

Nevertheless, as Japan’s economic docket remains fairly light for the week ahead, we should see the USDJPY continue to consolidate within the upward trending channel from earlier this year, and the dollar-yen may carve out a higher low ahead of the next interest rate decision as Governor Kuroda maintains a highly dovish tone for monetary policy. In turn, we will continue to buy dips in the USDJPY on a longer-term scale, and we may see a move back towards the 50-Day SMA at 98.88 as the pair searches for interim support. – DS…More at Japanese Yen to Consolidate Further Ahead of Next BoJ Meeting – DailyFX

 

Robert Savage, Chief Strategist at FX Concepts, discusses his outlook for the Japanese Yen. He speaks on Bloomberg Television’s “Lunch Money.” (Source: Bloomberg): 

 

 

This time it is different – for the first time in decades, the yen has fallen against the dollar for eight months running. But Ashraf Laidi, chief market strategist with City Index, tells Long View columnist John Authers that the yen will continue to sink.

 

 

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